My idea all begins back in January ( 1 ). Trump is inaugurated and hope and praise infiltrates the markets. We see a modest boost, a short hesitation, before bumping to all time highs. But that hesitation, was telling. As the partying ends ( 2 ), profit takers sell out in droves, driving another bull run as FOMO sets in. Coupled with uncertainty now that Trump is starting to be tested as a President, being rebuffed at almost every step.. Everyone is watching the news. Everyone has fear.. Markets have entered ( 3 ) THE PROFIT ZONE.
What is The Profit Zone? It is a period between highs and major levels of support when uncertainty rises. Rather than play the direction the market is going to go, become the seller and profit on the LACK of direction the market wants to go. ( 4 ) Sell OTM calls, or increase your shorts the closer we get to the top of The Profit Zone. ( 5 ) Sell OTM puts, or increase your long position the closer we get to a lower support line.
I would look to staying in this zone for another week or two. Obviously breakouts can occur at anytime, so step stops accordingly and always insure or hedge your positions to minimize your risk.