DIA – 3 Month Chart – May 12, 2009

I charted the Dow Jones Industrial tracking ETF after markets closed on May 12, 2009 when it closed at $84.72.  I have May 82 DIA calls that are in the money and about to expire on Friday if DIA doesn’t drop soon.  I’ve been expecting DIA to fall for the past couple of weeks and I keep losing.  I have my calls hedged, but will take a small loss if the next three days don’t change direction.

• DIA found support and recovered when it hit its 10 day moving average today
• DIA came very close to its trend line of higher lows before recovering
• Williams %R remains overbought and until it breaks below that could remain on its uptrend
• Volume on DIA has been light for weeks
• DIA’s 50 day moving average is still below its 100 and 200 (not shown) moving averages

Opinion = Although DIA found support today as noted above, these same lines will be important to watch tomorrow.  Soon the trend lines of higher lows and higher highs will converge and I expect DIA to break to the lower side.  Until one of those lines break, I don’t advise following my trade and betting against DIA yet.  Wait for the break and be ready to make a quick trade.  The move could be vicious once it starts.