Bond yields, in short. As noted in the 2021 Annual, interest rate risk is an issue this year. Rising interest rates damage many sectors of the stock market and Tech is one of those. The below chart of the relative value between inflation-protected bonds and the standard 10-year T Bill is used to monitor investor perception of inflation risk. You can see at the height of COVID last March, inflation wasn’t a concern. Since then, the US government has increased the supply of the USD at an alarming rate. One-quarter of all USD existing today didn’t exist a year ago.
More dollars chasing same quantity of goods= inflation. ECO 101.
TSLA remains wildly overvalued on a Price to Earnings basis and is to be avoided.
Hope you and yours are well. My typical every-other- Thursday note is early because this is a big earnings week impacting my holdings. I am going to make some forward-looking statements. Buying stock before earnings is risky business. Read the below opinion recognizing that everything mentioned is a holding and many I’ve owned for a time. Don’t want you to dive headlong into some new position when negative earnings surprises may await! If you must- only put 30-50% in pre- earnings.
- TSLA. Decided to sell 50% this coming week. Will put the proceeds into AAPL, GM and NVDA. First, I am slimming down because I am up well over 100% since buying it and secondly, the wheels are coming off the party bus. Last week’s earnings were a disaster. TSLA stock is priced for perfection. I suspect that if it wasn’t in the S&P 500 it might have cratered. Bad earnings coincided in time with massive inflows into S&P 500 stocks (the bi-monthly millions of 401k and TSP money). S&P funds must buy IAW the % of the “weight” of an issuance and TSLA weighting in the index is significant (1.69% / #6 in size). Only reason, aside from blind optimism I can think of to explain why it didn’t hit our sell stop.
The blue line is the TSLA elevator trend line that shows the doubling of TSLA’s price in 2 months. You can see that trend line has now been violated. Generally parabolic runs end in parabolic price drops. Maybe not this time. It may resume or (better) just base along where it is for now. That’s why I will keep half w/ a $769 Stop Loss. While I generally characterize attempts to regain above an elevator trendline the “Napoleon crawl” (wishful Bullish thinking before a Waterloo) for the Rob Gronkowski Party Bus of stocks… let’s call this a walk of shame. TSLA’s story is not over- but ST it faces serious headwinds & rapidly growing competition from GM, F, the Europeans, the Asians and apparently… Apple?!
- DKNG: ($63.87) Decided to forgo Canopy Growth that I mentioned a few weeks ago I was planning to acquire. CG is a good stock but I bought Draft Kings (DKNG) instead. Figured if I was going to place a bet on bad life choices, gambling on gamblers made more sense in a perverse kinda way.
- AAPL: ($136) Excellent rising trend chart. Buy if it hits $130. Earnings up 21%.
- AMZN: ($3352) Still range bound BUT may blow past upper range resistance at $3500 if 07 Feb earnings are good. If midnight deliveries of packages in Dec was an indicator- earnings should be outstanding. Bezos moving going from daily operations to a strategic role is a very smart move.
- F (Ford $11.51) crushed earnings last week and is threatening to bust $13. F hasn’t threatened that since 2011 and briefly in 2014. Success of a LT Triple Top breakout would indicate a move towards $20.
- GM ($54.41) Feb 10 earnings. Expecting it to beat with ST upside of $65-70. Cramer is on the GM bandwagon. Love him or not, he moves markets.
- GNRC ($270) Established a new trading range between $240 and $280. GNRC generally sits in a range for 3 months and then rises 10-15% and repeat. Earnings Feb 11. Suspect Cali wildfires last fall will spike sales this year. Millions sat in the dark while PG&E tried to dodge the risk of causing another fire. Anyone with $7000 will be a potential generator customer. In 2019, there were not enough qualified installers out west when the first series of utility inflicted brownouts happened out west. They have them now! If GNRC falls, buy. Its more than just a generator company now.
- INMD ($67.77) In price discovery (PD) up 50% in 2021. The definition of a parabolic move. A good hold, but 10 Feb earnings might deflate this one ST.
- NVDA ($543) Expect 11 Feb earnings to push this over $600. But, when NVDA disappoints, hang on for a -30% drop. I don’t have sell stops on this one, myself. Cost basis is way under $100. Buy on a dip- this is a modern blue chip.
- PLUS ($95) Set an alert- if this breaks $105, get into this one if you are not already.
- RNG( $407) Ring hit my $400 target. Up from $300 in Dec. Earnings 16 Feb. I am a holder, but if you’ve been following this trade since the $250 range, ringing the bell on some before earnings might make sense.
OPTIONS: Opening Long Call in the money positions Monday on GM (40% of $), NVDA (20%) AMZN (20%) and both GNRC & INMD at (10% each). Mentioning since my assessment of stocks with the best potential ST move higher can be implied by the allocations. A Call is a bet that over a short term, the stock price will go up. Buying Calls before earnings isn’t what most investors do because it’s risky. Calls lose value fast price drops.
Of all the stocks hitting earnings, GM chart appears most likely ST profitable followed by NVDA & Amazon as probable winners. Last two are just foolish speculation. No amount of Technical Analysis can justify my decision… and I tried really hard to give myself something or someone to blame. Well, fine! See #3, bad life choices.
- BTC ($38,636) Things are looking up for Bitcoin! Two weeks ago, I was concerned it was headed towards $25,000.
- We remain in a confirmed Crypto uptrend, but BTC really needs to push over its Jan ATH just north of $41000 for this to regain true momentum.
- Keep in mind my bias! I will pull the trigger on crypto fast when I see weakness. Rode too many coins down 90% from last peak. That has burned loss- bias into my decision-making process.
- Must Own Coins: BTC, ETH, ChainLink. Other good ones: AVE, UNI, SNX, GRT, REN, VET (VeChain) and ALGO. Some like AAVE are up 50% in a week. I guess I owe you an analysis on these puppies that might better inform your decision making. Will do that on Thursday.
- Avoid Ripple Labs XRP. USG is pulling them into court. Enough said.
I fight inbox clutter & won’t give it a second thought if this isn’t what you need cluttering yours! Lacking sophistication- unsubscribing is just telling me! Added some folks this week. If you want, I will add more to my list in order to spare you having to forward. Just get their permission first! You can reach me at email@example.com
Till next time, be excellent! Pete
BTC in last few hours has fallen sharply on light volume. In January, Bitcoin went up and it was partly credited by pundits to the coronavirus and a demonstration that bitcoin has become digital gold. Based on the relatively low volume in recent hours, that argument remains a question mark. The drawdown will probably reverse near the established price channel.
<< This chart is a day old, but the pop over 10K in last few hours remains meaningless short of a real move over 10,190.>>
BTC chart is displaying a complex Head and Shoulders pattern that has yet to confirm by a violation of the neckline by -5%. If it does fall below that point, it may free fall even lower.
It is very common during drawdowns for investors to miss opportunities. Especially the Hodlers. To avoid pain caused by falling account balances, they tend to ignore the market until good times roll.
Drawdowns are the time when one should actually focus more on the markets. When things go on sale- the ones with relative strength (RS) become more obvious. Those with great RS perform much better than the average ones in the next uptrend. While doing that, LINK has peaked my interest and will dig deeper . The current price action is reminiscent of ETH in the early spring of 2018.
Position size review / reduction of both BTC, GBTC and alt coins prudent in light of current technical weakness
Bitcoin is executing an orderly uptrend. In the near term there are few red flags indicating a downtrend might emerge. Also, there is no evidence that a “moonshot” or parabolic spike is in the making anytime soon. That is good news. There are an increasing number of BTC bulls that are convinced that the next spike is imminent- at least according to a scan of YouTube click-bait.
The case for it not spiking and continuing to stair-step is that this is sustainable. The longer it is sustained, the better a launch pad it is for the next spike. In the last few weeks of the 2019 rally, BTC shot up 65% from $8k to over $13k. Not a parabolic spike, but a huge move. Problem was, it started from $8k and ran out of steam. If BTC had a 65% move from its current price ($9857 (02/10/20 UTC:1700)) it would reach $16k, which is a major resistance zone. Again, it would probably run out of steam and fall. Ideally it climbs past $13k before having a large gap- up. That would likely be sustainable rally to a new ATH.
I suspect BTC will again suffer a parabolic spike, probably in the next 12 months. It will happen probably like the last time- driven by FOMO once it rises significantly above its last ATH. Be aware- based on historical pattern its likely to hit a new ATH at least 20% above previous and then trend sideways / sightly lower for 3-9 weeks while it consolidates gains.
Bottom Line: Chainlink (LINK) is most bullish, relative to Fibonacci Retracement. The reason is that is has moved significantly above the 61.8% level. From the perspective of this indicator- there the Jul 19 high is the next major resistance level.
Bullishness in order: Chainlink, Bitcoin, Ethereum, EOS, Tron (TRX), LiteCoin (LTC), Ripple Labs XRP (not shown).
Bitcoin moving over its 50% level is a sign of strength. The remainder are struggling at the 38.2% level. Ranked EOS ahead of TRX simply because it hasn’t lost value since hitting the level. The fact is the last four are laggards in terms of Golden Ratio ( https://preview.tinyurl.com/7vkpugr ).
Sympathy for the laggards: Since crypto price is symbiotic, particularly relative to Bitcoin price, a solid argument can be made for shifting some towards the laggards since they do tend to price appreciate later in a bullish bitcoin cycle.
Greyscale Bitcoin Investment Trust (GBTC) is a U.S. exchange based trust that represents a fractional amount of Bitcoin. For details, see: https://grayscale.co/bitcoin-trust/
GBTC has many downsides to just outright owning Bitcoin, but it has convenience and also can be placed in retirement accounts. GBTC is a derivative investment- so charting it has risks not inherent to the underlying. Because GBTC trades at a premium (that shifts constantly) to the price of bitcoin, it is a great indicator of the opinions of stock market investors.
Update to the Relative Strength Indicator / Williams %R and re-worked the support / resistance levels
Range bound trading in BTC continues with a test in last 24 of support at previous resistance level.