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DRJ: At market highs, what to do now?

Jon "DRJ" Najarian (ask-drj@optionmonster.com)

As the Dow Jones Industrial Average hits all-time highs, what should investors do now?

I'll be addressing that question on CNBC's special coverage tonight with Maria Bartiromo and at TheStreeMONSTER Investment Conferenc e with Jim Cramer and other great people in June. But for now, here are some things to consider.

First, it's important to remember why we're in the markets at all: to make money. That leads me to my first suggestion.

1. Buy something for yourself.

If you have ridden this bull market, I recommend going to your favorite store and treating yourself to a new watch, coat, or a box of premium cigars. Why? Casinos use chips instead of cash because they want you to forget that you're gambling with real money. But a physical purchase is a tangible reminder that gains (and losses) are real, and that will make us better traders and investors.

2. Re-examine your allocations.

Depending how long you've been in, and given the market move, you may be overexposed. If you had meant to be 60 percent in stocks and 40 percent in fixed income but haven't changed that allocation since the market bottomed on March 9, 2009, you may find that you are closer to 90 percent in stocks.

3. Find ways to lock in profits.

This doesn't mean you have to sell everything, but you should take steps to protect your gains. Holding is fine but plenty of uncertainty remains, so you can buy puts or VIX call spreads as insurance against any pullback. (See our Education section)

4. Learn from your trading.

Examine what has been the best strategy and learn from those that were less successful. What decisions have been valid, and which were ill-advised. Ask yourself: "Do I need to do something with my portfolio to shift or adjust, given this move higher?" That leads us directly to the next point.

5. Look for new opportunities.

When the laws of diminishing returns kick in, there will be limited upside to many of the most obvious winners to date. So you may need to look a little harder for names that don't have the highest profiles.

Our researchLAB tool is tailor-made for that very purpose. Here are the returns on just a few of the names that have been highlighted by this proprietary service:

  • Terex (TEX), up 5 percent today, 19 percent on the year.
  • Oshkosh (OSK), up 4.7 percent today, 32 percent on the year.
  • Navistar (NAV), up 5.2 percent today, 14 percent on the year.
  • Manitowoc (:MTW), up 6.4 percent today, 23 percent on the year.
  • CNH Global (:CNH), up 4.8 percent today, 11 percent on the year.

6. Listen to your own advice.

Finally, be proud that you have pushed aside the consistent chatter from the folks who have misunderstood the volume discussion. For years, people have been saying that you can't trust this market because of low stock volume. But the industry has changed rapidly in the last few years, and option volume has grown exponentially. The reason: the leverage and protection of the derivatives markets can give you a huge advantage in trading and investing.

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