Drilling For Diamonds
Today let’s take a quick
walk through three time frames of the Dow Diamonds (DIA). After reviewing these
charts, it appears that a bearish case is unfolding. Let’s review each time
frame briefly.
First, let’s look at the
daily chart of
(
DIA |
Quote |
Chart |
News |
PowerRating). Although the Fibonacci price resistance zone is not
shown on this chart, there are Fibonacci levels from 87.75-89.50 acting as resistance.
Notice too on this daily chart that we potentially have a Head & Shoulders Pattern
forming against this resistance. To get some confirmation of this pattern let’s
drill down to the 60 minute chart.
Below we have the 60 minute
chart price action of the time frame covering the right shoulder from the daily
chart. We are on the verge of completing a Bearish Gartley pattern into a Fibonacci
price resistance zone. So this time frame confirms the potentially bearish situation
on the higher time frame. Now, just for kicks (and because my eye caught this)
let’s drill down to the 30 minute chart and see if anything is happening on
that time frame.
This is beautiful. We have
a Bearish Butterfly pattern completing on the 30 minute chart below in the same
Fibonacci price zone as the pattern on the 60 minute chart is completing.
Those sure are pretty charts
but translate please, Derrik. (I like to talk in third person…I mean, Derrik
likes to talk in third person). Alright, in the short term the Diamonds could
see a one or two point run up into our focus resistance zones listed on the
charts above. However, with the patterns and price resistance a case has definitely
been built for this ETF to roll over and make a move to the downside. At this
time that is what the charts are suggesting and I will follow the hand that
price action gives us. Now, we need to be flexible, because lets play out the
scenario that DIA rushes right up through these resistance levels and totally
shatter our patterns is all hope lost? Heck no! Price would be telling us to
forget shorts and be looking for long opportunities. That decision is a couple
of steps out. For now I’m focused on the patterns and price resistance at hand.
Regarding
(
KKD |
Quote |
Chart |
News |
PowerRating): I received
a number of responses about my column on the potential short set up on Krispy
Kreme on Monday. All of them very kind (thank you), but a number of people pointed
out a very bullish scenario for KKD. The stock has just broken an intermediate
trend line to the upside. The relative strength is quite high. Short interest
is at astronomical levels (typically a contrarian indicator to go long), etc.
All of these points are accurate and well received. My point with this chart
is that many of the parameters I follow have signaled a potential short. Follow
the triggers/entry system that you have established and if it triggers an entry
consider taking it. Personally, if I’m short my risk is defined by the top of
that price resistance zone listed in the column. I admit, I could be way off
base on that trade. Here is the critical point I want to make though: If you
have a system that you use and you are making money with it. Don’t cherry pick
and second guess yourself. If you have an edge, take every set up and entry
that is provided to you because, guess what…you are going to lose money in some
trades. Who knows what set ups will be the losers but I have yet to run across
a trader that is 100% accurate. You have to get through the losers to experience
the winners. Don’t second guess, because I guarantee the one set up you pass
one will be your winner. Then you’re really screwing with your emotional state.
Be consistent!
Have a great
night!
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