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How is the stock market hitting record highs right now with all the uncertainty in the world? I don't get it

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One of the main reasons I said to trade another bull market leg was because BREXIT and uncertainty in the next domino to fall would result in the wealthy looking for safe haven investments. They are parking their money in U.S. equities.

They ran TWTR up ahead of earnings Tuesday and are taking profits. If it surprises to the upside it will jump to new highs and push $20. If it comes in line then the # of new subs will dominate the analysts talk. If subs showed growth revenues hitting anywhere close to expectations the stock will also jump.

Flat subs will likely put TWTR in a range between $15.50-$recent highs until 6-7 weeks before the next quarterly earnings. That would be a perfect setting for selling covered calls out 2 weeks anytime above $18.25 and then rinse and repeat for up to 4 cycles. You could literally earn a 20-30% return on covered call premiums over that span.

It found support early this morning so far and if that holds expect a slight move higher, but doubtful any breakout into earnings. The recent 4 day attempt to new high resistance could technically become the head of a head and shoulder. Pull up a 10 day chart and you see what would be the left shoulder and head. Today could be the start of the right shoulder in line with the left shoulder. What that would tell us is that the big money is positioning for a drop when earnings are announced. Therefore my hedge will go into place by end of day Tuesday. I've already booked stock sale profits on spotting that resistance but did not sell covered calls. I'll hedge with Puts versus covered calls because I don't want to reduce my core holdings in case of an upside surprise.

Giving you a very detailed approach example here to let you see how I manage each individual stock.



Happy trading!

Shorting this market will eat you alive! DON'T DO IT! You have to adjust your minds away from looking for tops to look for pullback entries. Talking resistance is great but breaking resistance is inevitable on most stocks.

3 PM's asking about shorting this market. Have you not been reading? "DON'T sell holdings or short anything when breaking 18k on DOW because it will be a BULL leg higher." That's a MACRO change. Until we have a macro change reversal you do not short the market or you'll get crushed.

Watching GILD for a breakout above $88 this week. Traders set an alarm at $87.75 and be ready to nab calls if breaking $88. Decent gap will get filled up above $96 so Call options have a lot of premium move.

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I see a little traffic on a fib with the 200day EMA at around 92 (point of confluence). Would you agree with this as a possible exit point, or just curious your thoughts. Fill the whole gap?

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This is a very good question and the answer is "it depends". If we shoot up quickly from 88 to approach that 92 then your call option will have a valuation pop that I would exit on. Even though I see that gap filing, it would fill "eventually" and time decay could decay the gains or eliminate further appreciation. Remember, I typically hold an option no more than 4 days, so that $92 would be a solid probability on a break out. Pigs get fed and hogs get slaughtered. A very successful trader told me a long time ago on options "I got rich selling too soon".

pfo - I'd buy whatever your trade would be and if options follow the above. If stock/shares then sell 50% at $92 and the rest within $0.50 of the gap fill. Use these opportunities to lock in additional profits and further reduce your core holdings price.

TWTR is a long term position build for me. I hold a number of core shares that I might hedge but do not want those shares lost. I have traded options similar to when spotting the KMI breakout to reduce holdings net price and then had extra shares purchased when at lows. Some of those sold at the resistance I was posting last week. I also posted that I thought about selling a covered call on day 3 of hitting that resistance. It would have been a solid trade as the shares dropped quickly from $18.60 to $17.76.

I posted that I did not sell the covered calls because I couldn't tell if the markets would break to new highs. Well the markets broke to new highs but it is crystal clear that the market makers are content to hold it under resistance until earnings Tuesday. And just to remind everyone I will be hedging TWTR by close Tuesday. These younger technology driven shares are susceptible to crazy moves on earnings. When you have a $4/share profit baked in I'll invest $0.25/share to protect my downside. If they beat and it jumps through resistance to $20 is anyone going to care that they made 25 cents per share less? Nope.

p.s. How you trade GILD just to be clear.

IF entering shares or options then at $88 the minute chart needs to show at least double the previous 5 minute volume so if it trades 60k shares a minute then look for 120k shares on the minute chart when $88 is eclipsed. Once entered a hard stop at $87.20 is targeted, because a breakout should not retrace to last two day closing price.