MM46 - MSL Rolling
I want to talk about what I do on days like today, when the market is extraordinarily weak and a few of my trades are sitting underwater. This is not financial advice. This is exactly where the strategies I have been teaching you start to shine, because this is where they help you dig out of trades that have moved against you.
When markets get this ugly, I do not panic and I do not sit here staring at the screen tick by tick. I go to my roadmap. I let the chart tell me what to do.
Let me start with Bitcoin, because it sets up everything else. We are closing in on the 200 week moving average. Not the 200 day, the 200 week. That level has been major support for Bitcoin in the past, so it matters. The question I am asking myself is simple. If we close below it, where do I think we go next?
I always have a next plan. I talk about the kiss back trade all the time, and you are going to hear me talk about it for years to come, because it is one of the most powerful entries I know. We had an old trend channel, we broke out, we rallied, and then we failed right at the 200 moving average. A lot of you asked me if I was buying there. I said no. I do not buy in the middle of a range, and I do not buy at the 200 moving average. I buy when we break out and close above it for a few days, or I buy at key support levels on a successful kiss back. I look for the roadmap to guide me to the entries with the best odds of winning.
That does not mean my trades never go underwater. Some of them do. It is how I manage them that matters, and that is the whole point of today.
If Bitcoin does not hold this 200 week moving average, the chart points to a kiss back of that old breakout, which now becomes new support along the trend line. On Bitcoin that sits all the way down around 53,000. People have asked me, could Bitcoin fall through support? It could. I would not be surprised to see 50,000. For what it is worth, I trade Bitcoin through IBIT LEAPS or through MicroStrategy stock and LEAPS, and I walked through those entry scenarios in MM24 if you want the full picture.
But here is the thing. I am not sitting here waiting for the exact bottom. This is where I say close enough, good enough. When we are closing in on key lows like this, I stop waiting for perfection and I start improving the trades I am already holding. MicroStrategy is the same story. Key support, next pivot low below us, and a little buy divergence showing up on the 4 HR IADSS. I am not paying much attention to the divergence, but I am paying a lot of attention to the fact that my modified synthetic longs are finally getting attractive to adjust.
Normally I wait for the exact entry I want. Mean reversion -2, confluence, buy signals, support. We have been holding support all week, and now we are finally breaking through. For me, this area is a close enough, good enough to start adjusting my MSLs.
So let me walk you through exactly how I do it. Because it is easy to talk hypothetically. I want to show you the real numbers.
The Starting Trade
Let me put real numbers behind it so you can see the repair, not just hear about it. I am using MicroStrategy as the example because it is the lever I have been pulling all week, and the moves are big.
Say I jumped the gun early and put on a modified synthetic long. I sold a December 2028 160 put and I bought a December 2028 130 put. That is my put spread, 30 points wide, and I took in at least a 15 dollar credit. My rule there is simple. I want at least 50 percent of the width of the short put spread as my credit before the trade even qualifies. Then I took that premium and I bought a December 12/2028 120 call. Sell a put, buy a put, buy a call. That is the MSL. If you have watched me break down a live MSL like the MRVL, TSLA, ALAB trades, the structure is identical. The put spread has to clear that 50 percent credit or I do not put it on.
This is how every one of my MSLs looks when it goes underwater, and this is the exact routine I use to manage all of them. The stock changes. The mechanics do not. I cover building these in Course 301, and the repair routine I am about to show you is the heart of Course 302.