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By Alan Farley
12:12 p.m. EDT
Bearish Hedge on the Dow
By Timothy Collins
10:14 a.m. EDT We are buying the ProShares Ultrashort Dow Jones ( DDM) May 28 puts for 50 cents and simultaneously selling the Dow Jones Diamonds ( DIA) May 83 puts for 67 cents. This is in a 1.5-to-1 ratio of DDM to DIA for a total net cost of 8 cents. This is a bearish trade. It will profit from a sideways or down move but would lose the 8 cents on a move higher in the Dow. This is a fast-moving market, so prices will change. Profits will accelerate on a downward move in the Dow. Long DDM May 28 puts, short DIA May 83 puts
Breaking the Channel Lines
By Helene Meisler
8:47 a.m. EDT After I wrote my column last night, I reread John Magee's chapter on channel lines and discovered something interesting. The amount (of points) that the chart fails to reach the top of the channel by (in the Nasdaq's case it's about 40 points) is usually the amount by which it falls from the lower trendline before having its first snapback rally. In this case we broke at 1,700 and closed last night at 1,664, so at 1,660 we'd be pretty close to that 40-point "number." That is in keeping with my thought that it's expiration week and we should have "one different" day. As I said in my column, it's usually a down day, but this has been a down week, so why not an up day? I'd look for a respite from the downside. No positions.