Summing Up The Week

Even with looming potential negative catalysts in the form of a rising U.S.-China Trade War and economic damage from the pandemic, the markets continued their upward climb this week, led in large part by the technology sector.

Companies with exposure to tech trends like the cloud, fintech (financial technology), and 5G led the charge once again throughout the week.

Let’s look at the news that moved the markets this week…

Market News

Private Payroll Growth Slows Sharply in July

Private payroll processor, ADP, released its monthly report on Wednesday showing private payrolls increased by only 167,000 in July versus estimates of a 1 million increase, reported CNBC.

While this number could certainly be seen as very bad news for the economic economy, some analysts are skeptical to its validity. “It is worth reiterating that the ADP has never been a great guide to the official payroll figures and has actually been particularly poor in recent months,” said Andrew Hunter, senior U.S. economist at Capital Economics in a note. “ADP’s initially-published estimates for May and June (which have since been miraculously revised up to better match the official data), are proving far too pessimistic.”

Johnson & Johnson to make 100M Vaccine Doses for U.S.

Johnson & Johnson (JNJ) announced it will develop and deliver 100 million doses of its coronavirus vaccine for the United States, reported CNBC on Wednesday. Valued at $1 billion, the deal also includes the option for the U.S. to purchase up to an additional 200 million doses.

J&J’s vaccine remains in development, with the company’s previous estimates suggesting late-stage human trials will begin as early as September with final vaccine doses available as soon as December or January.

Jobless Claims Total 1.18M vs. 1.4M Expected

New filings for unemployment benefits in the last week totaled 1.186 million, the lowest of the coronavirus era and lower than the 1.423 million expected by analysts, reported CNBC on Thursday.

In addition, the number of Americans collecting unemployment benefits dropped by 844,000, the second consecutive week with decreasing continued benefits, however the total number of Americans collecting benefits remains at 16.1 million.

Analysts cautioned that the report doesn’t indicate as much positive news as some may think due to the federal unemployment bonus of $600/week expiring at the end of July.

Trump to Ban Chinese Apps WeChat and TikTok in 45 Days

President Donald Trump issued executive orders on Thursday banning U.S. transactions with Chinese tech firms Tencent (TCEHY) and ByteDance, effectively banning their apps WeChat and TikTok in 45 days, reported CNBC.

The order comes after members of the Trump administration and intelligence community repeatedly expressed concerns about valuable data on millions of American citizens falling into the hands of China’s communist party. Since Tencent and ByteDance are both headquartered in China, the communist party has existing legislation which could force the companies to hand over data to Beijing, if requested. 

Microsoft announced on Sunday that it was in talks with ByteDance to acquire TikTok’s business in the U.S., Canada, Australia, and New Zealand within the next three weeks in advance of Trump’s deadline.

While the orders protect the data of users of the apps, some analysts cautioned that China will likely take retalitory measures against major American companies operating in China such as Apple (AAPL), Costco (COST), and Nike (NKE).

U.S. Adds 1.763M Jobs in July vs. 1.48M Expected

On Friday, the Labor Department’s July jobs report showed the United States adding 1.763 million nonfarm jobs in July vs. the 1.48 million expected by analysts, reported CNBC. 

The unemployment rate fell to 10.2% which was alo better than estimates which sould a rate of 10.6%. The report showed that many of the gains were a result of the return of displaced workers laid off as the nation locked down to prevent the spread of Covid-19.

Next Week’s Gameplan

While I’m not making any moves toward adding to my positions in this market, I have been regularly revisiting and revising my Buying in Stages plans, raising price targets on certain tech positions which continue to show strength in the markets.

For the moment, the markets continue to be a waiting game. While the indexes tread higher, I continue to eye what feels like a tsunami of potential consumer debt on the horizon should a stimulus plan not pass or the development of a vaccine take longer than expected.

This Week in Play

Stay tuned for this week’s episodes of my two portfolios Investments in Play and Speculation in Play coming online later this weekend! 

Crytpo Corner

Bitcoin Price Action

Bitcoin pulled back -13% last Saturday (8/1/2020) before finding support at $10,546.15, its new weekly low, after dropping through the $12,000 mark earlier in the day.

The crypto seemed to recover over the course of the week, however, it started melting down earlier today (Friday, August 7, 2020) as I write this. Holding the $10,546.15 low of support will be key to continuing this bull rally.

The Bullish Case

Bulls believe an even more substantial rally is imminent, pointing to Bitcoin’s tendency to repeat fractal patterns. Currently, the chart of Bitcoin resembles those of 2015 right before Bitcoin’s last epic move to a high near $20,000. Some bullish analysts predict Bitcoin will see $14,000 by October of this year followed by $20,000+ before the year’s end.

The Bearish Case

Bears argue that Saturday’s weakness combined with the meltdown today marks the end of the rally. Some suggest that Bitcoin whales (speculators who hold large amounts of the cryptocurrency) are falsifying the current fractal pattern in an effort to lure bulls into a false sense of security before flipping the market to drive the price below $10,000 once again.

Bitcoin Gameplan

Current Allocation: 0.889% (new position)
Current Per-Coin Price: $11,161.44 (new position)
Current Status: +5.296%

I closed my last position during Saturday’s (8/1/2020) dramatic 10%+ pullback from $12,000, locking in the remainder of my profits around $11,300. The entire trade earned me an overall gain of +15.64% on a 1.375% allocation and added 3.71% to my offline Bitcoin holdings. 

As always, I choose to keep my profits in the cryptocurrency I’m trading to accumulate additional holdings for the long-term.

While Saturday’s selloff shows there’s likely plenty of volatility in Bitcoin’s future, I’ve noticed that, historically, Bitcoin pulls back significantly even during a long-term bull market, often to near the 21-Day Exponential Moving Average (EMA).

Accordingly, I opened a new position after Bitcoin started price consolidation following its -13% drop with my first buy landing 0.889% of my maximum allocation at a starting price of $11,161.44 (after fees). 

From here, I will either add more on additional pullbacks or ride the bull wave with what I have and take profits following price consolidation much higher than here.

Bitcoin Buying Targets

Using Moving Averages and supporting trend-lines as guides, here’s my plan of buying quantities and prices:

0.889% @ $10,827
0.889% @ $10,057
0.889% @ $9236
0.889% @ $9023
1.333% @ $8668
1.333% @ $8346
1.333% @ $7963
1.778% @ $7077
2.222% @ $6740
2.667% @ $6388

Bitcoin Selling Targets

Right now, the new position is in a holding pattern. If Bitcoin continues its upward trend, I’ll once again eventually use stop-loss limit orders to take profits and close the position, however, that will require a much more substantial increase from here.

Why the differing quantities at each level instead of a flat percentage?
Rather than buying an equal percentage, I change my buying quantity at each stage as a reflection of how likely Bitcoin could bottom and rebound from that stage. Rather than increasing my quantity on the way down, I’m used a fixed amount of money, so I’m basing how much I buy by how likely I think Bitcoin will drop to a certain level. In this case, I don’t think it’s likely Bitcoin will be able to break its $3128 low, so my quantities under that price point are less to account for the chances it will get to them.

No price target is unrealistic in the cryptocurrency space – Bullish or Bearish.
While traditional stock market investors and traders may think the price targets in the cryptocurrency space are outlandish due to the incredible spread (sometimes a drop of near -90% or a gain of up to +1000% or more), Bitcoin has demonstrated that, more than any speculative asset, its price is capable of doing anything.

Here are just a few recent price movements over the past couple of years:

• Bitcoin rose +2,707% from its January 2017 low of $734.64 to make an all-time high of $19,891.99 in December of the same year.
• Then, Bitcoin crashed nearly -85% from its high to a December 2018 low of $3128.89.
• In the first half of 2019, Bitcoin rallied +343% to $13,868.44.
• From June 2019, Bitcoin dropped -54% to a low of $6430.00 in December 2019.
• From December 2019’s low, Bitcoin rallied +64% to $10,522.51 in February 2020.
  
• In March 2020, Bitcoin dropped -63% to a low of $3858.00, mostly in 24 hours.
• From March 2020, Bitcoin rallied +215% to $12,134.29 in August 2020.
• Where will Bitcoin go from here? Truly, anything is possible…

What if Bitcoin’s headed to zero?
The only reason I speculate in the cryptocurrency space is I truly believe Bitcoin isn’t headed to zero.

I am prepared for that possibility, however, by knowing I could potentially lose all of the capital I’ve allocated to this speculative investment. Professional advisers recommend speculating with no more than 5% of an investor’s overall assets. Personally, I’ve allocated less than 2% of my assets to speculating in crypto.

I feel that anyone who doesn’t believe in the long-term viability of cryptocurrency would be better served not speculating in the space.

On a good day, this asset class isn’t suitable for those with weak stomachs. On volatile days, the sector can induce nausea in the most iron-willed speculator.

DISCLAIMER: Anyone considering speculating in the crypto sector should only do so with funds they are prepared to lose completely. All interested individuals should consult a professional financial adviser to see if speculation is right for them. No Get Irked contributor is a financial professional of any kind.