Illinois Tool Works (ITW) has been firing off short signals (red paint bars derived from proprietary indicators) for several weeks as this stock as chopped higher. You can see that price action appears to be starting to roll over. Today's closed triggered the short confirmation signal on my proprietary indicators (not shown) which caused me to look further into this stock. The other thing that got my attention is that implied volatility has steadily exceeded historical volatility since back in February, and well into today when my indicators confirmed a short signal. This indicates that options traders are predicting a large move in this stock, and my indicators suggest it will be a bearish one.
Now, let's look at the Elliott Wave structure. Here too I can see a Minor wave 3 finishing and a wave 4 down getting underway. Although I'm not sure wave 3 is completely done yet as wave ((a)) and ((b)) seem a bit tight and close together relative to where wave ((c)) should end up. Either way, the evidence lines up for this stock to be getting a nice bearish move underway soon so I made the following trade right before the close:
Bought ITW put vertical June 14 97.5/105 for $1.91
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PLEASE NOTE: THIS IS AN ELLIOTT WAVE BLOG EXPRESSING AN OPINION AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. TRADE AT YOUR OWN RISK.
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