Mar8 weekly chart reading: DIA

Last prediction: In the week before last week I predicted that: 1) previous trend would continue, i.e., go down; 2) suspected that market might give us a surprise, i.e., a upward breakout. What the market did was: 1) firstly a upward breakout, it was a fake one because the volume was small; 2) then going down again with slightly bigger volume. This means my prediction was right.

Action: if I had no guidance I would have closed March call options and opened farther month put options. But I didn't, and hadn't set up any hedges. Because I followed the highhand's advice that "no action is action" and trusted that "the market is at the bottom and will rally soon". The last two week has approved that my action was stupid.

Weekly: see the big trend first.

from the chart I can see that:

• the intermediate bullish trend started from July 2006 was broken in 2007. The thin trend line was challenged in Aug 2007, but in that week the volume was huge and the close price was above the trend line, so vaguely the trend was still not reversed, afterward it was broken in Nov 2007 with significant volume, note that both STO and OBV were down while the former signal was way above 50, and RSI was neutral in that week, this may indicate that the market momentum was not weak. Then the breakout of this thin trend line got tested with decreasing volume. Finally in the last week of 2007 the bold trend line was broken. Note that although the volume was very small, but RSI, STO and OBV were going down, and both RSI and STO were crossing below 50, this may indicate the market momentum was weakened further. On the next day the breakout was confirmed by a big down with big volume.
• The slope of the intermediate bullish trend line is quite steep, so I put a long term trend line, which was started in Aug 2005. Roughly it has been tested three times but it hasn't been reversed yet.
• When DIA made a new high in Oct 2007, the volume was small and divergence in RSI indicated that there would be no higher high later. In the next week there was a big down with big volume and this was possibly due to fear of market crash.
  
• Triangle pattern since Jan 2008: no matter it is a symmetric triangle or upward triangle, it IS a typical triangle pattern with decreasing volume, and this means the previous trend will continue. It has broken out in the last week with significant volume. Although the lower edge of the triangle may be tested, i.e., there might be sucker's rally, it is unlikely that the downward trend line started in last Dec will be violated.
  

Now RSI, OBV, and STO all indicate that the market will go further down. RSI and STO have space for further downside movement. According to J. Murphy, the triangle pattern may pull down the price to under 100. Considered that the volume is small between 110 and 118, the long term trend line may be broken easily and DIA may go down to 110.x. However it is unclear if it can really dive under 100.

Daily chart:
What will happen next? The daily chart tells the near-term trend, and the following is my opinion on it.

• If the price doesn't go above the neck line (started on the last Aug), the down trend will persist.
• Previously there was a triangle pattern and we got a breakout in the last week of Feb. However the volume was not strong enough. With further up and down, it had become a bigger triangle pattern by the end of Feb.
• In the first week of Mar the new triangle pattern had a breakout and the volume is higher than the ones before breakout. Therefore it should be real.
• Now all three indicators, RSI, STO and OBV are going down. RSI is not oversold, STO is just crossing below 50. So the near-term downtrend is not over yet.

The triangle pattern will likely be tested, although the near term is still down. I don't expect DIA can go above 126, but 121 is possible in the next one or two weeks, and that time should be a good chance to open short/put positions.