The 10 day moving average had a bullish crossover above the 20 day moving average yesterday which typically signals coming strength.  That makes the trend line mentioned above interesting since it disagrees with its own strength.  I’m planning to wait to add DIA to my holdings on a dip closer to 100.  That’ll put it near the current points of the 10 and 20 day moving averages.  Another 5% dip for DIA should be an ideal entry point for multiple reasons.  That’s close to the trend line of higher lows, the powerful 50 day moving average and would be consistent with how far previous mini-corrections have taken DIA before it finds its legs again.

• 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.

• DIA hit the line of most of its three month intraday highs this morning
• The one time DIA closed above this line it used it as support and then failed the next day
• DIA is trading above its 10, 20 and 50 day moving averages
• DIA is in the middle of its trading channel between the trend lines of its higher highs and higher lows
• Volume on DIA has been low for weeks

Opinion = I consider the horizontal line of resistance around $81.70-81.90 as the key point to watch.  In fact, late this morning my limit order for a bear call spread hit and I sold May 82 calls and bought May 83 calls.  If it wasn’t for that line I’d expect DIA to continue its bull run based on the trading channel and trend lines.  I won’t turn bullish on DIA until that horizontal line is crossed and DIA closes above it for at least two days.

• DIA broke below its trend line (A) of higher lows on Monday and confirmed the break on Tuesday by staying beneath it
• The horizontal line (B) that acted a ceiling for resistance and then a floor for support met with its declining trend line (C) of lower lows this morning – both held support at the same point this morning and pushed DIA higher
• The trend line (D) of slightly higher highs is the higher level of resistance, not much above $82.00, allowing an average of ~$0.10 per day in new highs for DIA
• DIA hit resistance at its 10 day moving average this afternoon and stopped its advance
• The 20 day moving average broke on Monday and again on Tuesday morning, but recovered before closing the day
• Williams %R broke below oversold on Monday signally a bearish move, but didn’t get confirmation on Tuesday as DIA regained some momentum

Opinion = Trend line B is a big one to watch.  If/when it breaks the next stop might be 75.00 at the 50 day moving average.  Below that will require another chart to be more accurate, but could easily head back to 70.00 or another retest of 65.00.  With the volume being light for the past few weeks I see it as something big is coming.  The down side might offer the path of least resistance after the quick and sharp rally we’ve just had over the past six weeks.