5/17/25 Best Idea For The Week Ahead

Before I get into this week’s best idea, I want to have a longer market strategy talk here with this here before trying to clear up any questions about the change I’m implementing tonight at the bottom before I get into it..

I want talk deeper about the 21 ema and why it is the most important moving average in the market as far as I’m concerned. This moving average is your barometer of whether a name is in a mid term uptrend or downtrend. I removed all the other moving averages on the chart below because I wanted you to see this by itself. Look back in mid February when we broke the 21 ema to the downside on the SPY. Do you see how we were in a fairly smooth downtrend all the way until we reclaimed it for multiple days in late April when this current uptrend we are in began. We had 1 small reclaim in mid March but it was a false breakout because it only lasted for 1 session. The reality is when the 21 ema breaks you now have a bearish trend and with that comes the computers that run the market flipping and becoming sellers. Notice how the first attempt over the 21 ema in April failed as we didn’t close over it and the second day we closed over the 21 ema which coincided with the break of the downtrend. At this moment, while we are over the 21, we are extended now, note how we’re at max overbought rsi and I expect us to go sideways at best or down to allow that moving averages to catch up.

The how or the why is never relevant, whatever news is coming is always priced in. Think about it, we were in a sustained downtrend before April 2nd and we were in a confirmed uptrend before Trump paused the China trade war for 90 days. Look where the market was in both situations in regards to the 21. With that in mind, if you stay long any ticker that is below the 21 ema, you have to know that the likelihood of a painful outcome is there. As I’ve said before, sometimes you have a long term hold and you don’t want to sell to create a taxable event, perhaps you have a position and want long term gains. Whatever it is when that 21 ema breaks it is best to accept reality and either go to cash, sell covered calls and/or remove whatever leverage you have. Leverage is fine in an uptrend, if you implement it in a downtrend you’re just asking for trouble because you’re trying to time something where nobody knows the duration. Now 90% of the time when we break the 21 ema, it is short lived, look back at the breaks over the last few years on the SPY, they’re few and far between. Although most were short lived, still, the possibility of an extended fall exists which we got in February this year. When you’re in an uptrend and you’re riding over the 21 ema, there is no possibility of a severe downturn as long as you’re above the 21.

So think of it like this, if you set a personal rule of every time the 21 ema breaks on any ticker you’re in you just simply exit until its reclaimed, then you will never suffer through prolonged misery and you will only participate in uptrends. In an uptrend you just stay long until that 21 ema breaks. Take for instance that big MSTR trade I took recently in April at 315, I’m up over 25% in a few weeks on commons, but we are nearing the 21 ema. The first close below that and I should close my trade up completely, but here’s the issue most fintwit traders never discuss, TAXES. As adults, who trade real money, many on fintwit do not, when you close a profitable trade there are taxes to deal with. On short term positions they’re very high so if you’re going to be super disciplined and close every 21 ema break, you’re going to create a ton of taxable events. With that in mind you have to decide for yourself if you’re going to close every break or if you’re going to just sell covered calls, make some money while you wait and ride a downturn. Just don’t sit there and act shocked when a name below the 21 ema keeps drifting lower, it’s in a downtrend, adjust your expectations.

Here is UNH, the current name on everyone’s mind, the same rule we discussed above would have applied here for anyone who cared to listen to the market. Look at mid March, it broke over the 21 ema and you had a nice uptrend for a few weeks. The first day it broke the 21 ema to the downside and closed, it was over 450 in mid April. That’s it, you had a choice here, my name is now in a downtrend, do I know how deep the downtrend is? No I don’t, but it is in a downtrend so how low it goes should never surprise, obviously the hope is always for a quick recovery, but until that 21 ema is reclaimed your name is now in a cycle of bad news and horrible price action. From there, it has not reclaimed the 21 ema a single day and it has been a house of pain with one bad piece of news after another. Pretty normal downtrend things. Did it bottom 2 days ago? It appears so from the volume, you can see the capitulation volume but until this goes over that 21 ema that is racing lower to catch up, it is just having a bounce in a sustained downtrend. The real moment of truth will come when UNH tries to get over the 21 ema, if it can’t, that is sellers telling you they want nothing to do with this long term.

I never dabbled in UNH until I saw that big put sale 2 days back and it was 25% lower than the name was at the time, that player nailed the bottom like most put sellers do. I was just waiting to see a big put seller emerge before getting involved. That’s why we look at options flow and overlay it with charts. We’re trying to see where big money is trying to play a name. Charts tell a story and option flow is just a live look of how money is positioning unlike a 13F. This week fintwit ran wild with all the 13F releases.People act like reading a 13F shows you how a fund is positioning itself. Those 13F are months old positions, Michael Burry for instance probably had those NVDA puts before the April sell off and he absolutely does not hold them right now through this massive rally that name has had.

So to reiterate whether its the market or individual names, you just want to press things in sustained uptrends over the 21, you also want to understand when downtrends are occurring below the 21 and remove risk or prepare yourself for short term weakness with covered calls, the end.

The Change Tonight

So lastly there was some confusion with what I wrote in my Thursday recap. It’s very simple, if you’re subscribed by tonight, late maybe Sunday night 10 pm EST, whenever we implement it, absolutely nothing is changing. You won’t ever pay more than you agreed to and you will still get recaps everyday from me. All that is changing is that I’m using the 1 subscription option substack gives me for the live part of my discord which I currently only have an annual payment option for. I want to use my 1 monthly subscription option for those who want access to the live channels in the discord and pay monthly. I did this in late December for a week and it was a success.

Unfortunately that means I can’t offer recaps alone for new users. Everybody will still get recaps and things will be as they’ve always been. Nobody will be able to get access to the recaps signing up without being part of the live channels going forward. I may change it back at some point in the future, but for now there are alot of people who’ve been asking me to find a solution and this is all I could come up with. So if you’re on a free trial you would have to be a paid subscriber by tomorrow night at 12 EST midnight which is when the change kicks in otherwise you would not be able to get that price again when your free trial ends.

So to recap, NOTHING IS CHANGING, all caps to emphasize it. Anyone signed up gets access to the community discord, there’s a link in the welcome email when you sign up. As of right right now there are 1,426 people in there. It’s an incredible community by itself. When you signed up you got a welcome email with a link to the discord. Within the discord there’s 3 private channels only people who pay for the live tier see. It is simply everything that comes in the recap just live for those who want to swing trades right as they come in, there is a smaller group in there of 211 traders who have access to a live feed, a channel to discuss trades, and a channel for everyone to post what they’re taking so you can generate some ideas. I will honestly say unless you’re an active trader it isn’t worth it because I send out the recaps mid day anyways, but for some people seeing an option bought for .50 the instant its bought and that same option is .65 when the recap comes out, it matters. Sometimes you see a massive call buy and you swing shares and a name pops higher instantly, so yes there is a reason why I do post it live for those who want it. If you’re just a passive investor selling puts or buying shares, the mid day recap is more than enough for most who aren’t doing this for a living.

When you sign up after tomorrow, you will get an email where you input your discord information and those new channels will appear for you. Be careful before upgrading because whatever option you have now will not be available to go back to, so please think before you switch over. Ask questions in the discord there’s plenty of people who can help you before you decide to switch over, its very straightforward the live feed looks like this throughout the session and you can see the 3 additional channels on the left.

This week’s best idea is a very simple put sale on a small cap $3B company offering over a 2% return on your cash in the next month selling puts on a trending name 35% lower than it currently sits with 3 large put sales overhead to support it.