This being a light-on-the-news holiday weekend, it's a good time to drill down on our most recent TSLA calls in the Premium Service and make sure everyone understands how a 50% trailing stop is calculated, especially as this most recent position is knocking on the door of triple digit gains. I want to make this as simple and straight forward as possible, it ain't rocket science, just some basic junior high school math. Premium Service TSLA Sep 15th $200C 50% Trailing Stops: Two Different Calculations (1) Based on Best Price Level: $23.71*50% = Stop & Exit price = $11.86 (2) Based on Best Percentage Gain: +127.98%*50%= +64% = Stop & Exit price = $16.64 Discussion Either calculation can be used as a 50% trailing stop. If holding multiple contracts it makes sense to use them both, i.e., one position's stop based on best price, the other position's stop based on best percentage gain. The first calculation is more aggressive, it will take more of a decline to get stopped out, keeping you in the trade longer. The second calculation locks in a larger gain, but by so doing would likely get you out of the trade sooner. Especially with TSLA, surprises have traditionally been on the exponential side, so the case can be made to stay in the trade as long as you can while still having some stop to protect against catastrophic losses. "Law of 3" Trade Management: Hold contracts in multiples of three, using stop calculations (1) & (2) on first two positions and trade the third position with no stop at all. Chartwise - As We Enter June On Friday TSLA popped above the descending trend channel with price rising to $198.60 intraday before slipping in the last hour to close the day at $193.17, right on top of channel line. Next week will be an important week for TSLA, it either continues to rally above Friday's high, or declines closer to the above described 50% trailing stop calculations. Note that absent a steep gap-down open on Tuesday, a profitable trade is locked in no matter which of the alternative stops is applied. However, should the market gap down steeply on Tuesday, other opportunities will present. See next chart: IWM By far the weakest of all indices is the broadest, the Russell 2000. March-May has been net sideways, eroding option premiums and frustrating the, "third wave down at multiple degrees of trend" theorists beyond end. When the last of us has given up on such a demise, expect the worst decline in modern market history. What financial and/or geopolitical backdrop will be attributed to causing such a catastrophic market crash? A lot of candidates are out there and while debt ceiling US default and an escalation of the war in Europe (or new one regarding Taiwan/China) tops most lists, something else is more likely, something that the market has not yet priced in. For our purposes, it won't matter, watch those key levels for breakdowns (labeled on chart), that's all the reason we will need to go all in on the short side. PLTR We may have been a few years early on PLTR and long since being stopped out on a 50% trailing stop, but after dipping below $6 last December, PLTR has doubled off of its lows, no doubt being a beneficiary of all of the recent AI excitement. Yes, it's a dot.com like phenomenon, but is it nearer the beginning...or the end? We will take a deeper dive into PLTR in a future update, but worth putting on our radar just not so much for now as for a major market Buy Signal in the fall. TWLO The way to read this chart is that TWLO triggered a Trend Model Buy Signal on May 22nd @ $57 and then reached an interim high of $62.64 on May 25th. Based on the low print of $45 on May 12th price projects to between $78 and $98 for this initial impulse wave up. The next time to add a position would be on the taking out the interim high of $62.64 as that would forecast a Wave 3 target of $78 and wave 5 target of $98. Any print above $80 would bring into the forecast a round number targeting of $100. A lot of "ifs" in this analysis, but one certainly and not an "if" is that CEO Jeff Lawson bought $10 million worth of shares in February @ $63.26, after being a net seller since Sep 2020. Remember, no market (except Bitcoin) is trading on Monday, so relax, watch a playoff game, or two, and take a deep breath, it's going to be a summer to remember...one way or another - Allan
