Diamond In The Rough
Dow Diamonds
(
DIA |
Quote |
Chart |
News |
PowerRating) have
been cruising along to the downside now for about two months with little interruption.
As I look at the daily chart of DIA below, I have reason to believe this downtrend
might come to a pause, and even reverse direction. DIA is facing a key Fibonacci
price support zone from 96.08-97.78. This zone consists of nine price levels
of support. I also have a potential cycle low in time for DIA between May 8
and May 10 (+/- 1 day). With these time and price parameters coming into play
at the same time, it provides me a high likelihood of at least a short-term
bounce in the opposite direction. However, if DIA fails to hold above this key
price support zone, then, based on our Fibonacci analysis, this down trend will
likely accelerate. So how can I apply this to my trading plan? First, I’ll be
tightening stops on shorts and even taking some profits. I’m not going to just
run out and buy DIA either. Rather, I will wait for a trigger to enter, since
it’s against the immediate trend.
