Summing Up The Week

Thanksgiving Week is always a weird one with the markets closed on Thursday for the holiday and open for only a half-day on Friday for… holiday shopping, I guess?

At any rate, it results in a 3-1/2 day trading week which can get wonky.

So, here’s the news that moved the markets this week…

Market News

AstraZeneca vaccine “only” 70% effective

AstraZeneca announced Monday that its COVID vaccine developed with the University of Oxford was found to be 70% effective, “highly” protective, reported CNBC.

While the 70% figure can seem low when compared to Pfizer’s (PFE) and Moderna’s (MRNA) vaccines – both of which received efficacy ratings near or greater than 95% – a 70% efficacy is still very protective as the White House coronavirus advisor Dr. Anthony Fauci previously said a 50-60% effective vaccine would be acceptable.

In addition, analysts at Jeffries said that when it comes to storage, affordability, and distribution, AstraZeneca’s vaccine appears to have an advantage as Pfizer’s vaccine, in particular, must be stored at extremely cold temperatures and has a very short shelf life when exposed to room temperature or even a consumer-grade refrigerator.

However, as the day went on, AstraZeneca clarified that two studies had remarkably different results. For patients who received a half-dose followed by a full-dose, efficacy was 90%. Ironically, patients who received two full-doses saw efficacy less than 65%. The resulting combination for the drug equaled 70% efficacy. 

Additional research and studies will be performed by regulators and medical personnel to determine what the cause may have been as well as which course of action to take between the half-dose/full-dose combination.

Biden selects Janet Yellen for Treasury Secretary

On Monday, President-Elect Joe Biden announced that he has chosen former Federal Reserve Chair Janet Yellen as Treasury Secretary, reported CNBC. This historic decision would make Yellen the first woman to lead the department.

Widely seen as a politically “safe” pick for the role based on her experience as Fed Chair, many pundits believe the choice will garner support from Senate Republicans.

While at the Fed, her four-year tenure included an improving jobs market and historically low interest rates, which may also boost her odds for confirmation.

Jobless claims higher than expected

On Wednesday, the Labor Department reported 778,000 new jobless claims made in the last week, higher than the 733,000 expected, reported CNBC. The number was also higher than the 742,000 reported last week.

Enrollment in the Pandemic Unemployment Assistance (PUA) emergency program, which helps those who have lost their benefits with 13 more weeks of compensation, surged by 466,106 to 9.15 million, and that figure trails by two weeks.

“This is one of the strangest recoveries from recession in history,” wrote Chris Rupkey, chief financial economist at MUFG Union Bank. “Companies are clearly not cash-strapped and are planning for a stronger economy next year as they continue to order up new long-lived capital goods equipment to meet the demands for their goods and services. Corporations don’t see uncertainty and don’t even know there was a recession.” 

Trump will leave if Electoral College votes for Biden

On Thursday, when asked if he would leave the White House if the Electoral College votes for Biden, President Trump said: “Certainly I will. Certainly I will. And you know that,” reported CNBC.

His comments were made while speaking to reporters on the Thanksgiving holiday. However, shortly after, he also said it would be hard for him to concede because “we know there was massive fraud.”

He continued his sometimes rambling discourse insisting, “It was a rigged election… at the highest level,” while continuing not to provide any concrete evidence of his claims of widespread voting irregularities.

Biden won the election with 306 Electoral College votes – many more than the 270 required – compared to Trump’s 232. Biden also led trump in the popular vote by more than 6 million.

The electors are scheduled to meet on December 14 to formalize the outcome.

Next Week’s Gameplan

The markets continue to climb higher and higher, with pundits suggesting investors are anticipating the U.S.’s return to normalcy as soon as May 2021. For me, I remain nervous about the numerous potential negative catalysts on the horizon including the potential of our hospital system being overwhelmed from the myriad of Thanksgiving parties thousands of Americans attended this week.

While I am eyeing specific sectors of weakness, the majority of my positions remain in Selling Season, looking for opportunities to Sell in Stages. 

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

After Bitcoin made another new 2020 high at $19,500.00 on Wednesday (less than $400 away from its all-time $19,891.99 high), the Bears decided they’d had enough and slammed Bitcoin into its first pullback of any size since the crypto started making its run from $9813.00 back on September 5.

The long knives were out for Bitcoin as the pullback knocked -16.92% out of the crypto’s sails at the lows taking it from $19,500.00 to $16,200.00 in almost a straight line before finding support. The weakness in the space continued through today where, while the lows have held, Bitcoin has not recovered its high, yet. 

The Bullish Case

Bulls stick to their fractal math with new bullish analysts claiming that hedge funds and institutional investors are pouring into the cryptocurrency space. Many analysts believe the entrees of PayPal (PYPL) and Square (SQ) into the space, offering consumers an option of where to purchase Bitcoin, will help produce ongoing bullish action in the space. Bulls say that pullbacks of this kind are normal during crypto bull markets and that speculators should not be discouraged with some predicting new all-time high price ranges of $23,000-$25,000 (though those same analysts don’t believe we’ll see those figures before 2021).

The Bearish Case

Bears point to Bitcoin’s inability to break its all-time high of $19,891.99 as the reason for the substantial pullback is in order. Bears believe that there will need to be some significant price consolidation before Bitcoin will break through its all-time high, once again suggesting that even the nearly 17% pull back isn’t enough. Some suggest a 25-40% pullback is likely and with others predicting a pullback to $4000 and lower as possible (a drawdown of 80%+ would be similar to the one experienced in 2018).

Bitcoin Gameplan *New Position*

Current Allocation: 1.087% (New position)
Current Per-Coin Price: $17,528.26 (-4.900% from first buy)
Current Profit/Loss Status: -4.725%

Given Bitcoin’s insane bullish action over the past two months, I decided to get slightly aggressive for my starting point, raising it to a 5% pullback from Bitcoin’s high and adding little by little during the selloff. Bitcoin triggered two buys on Wednesday at $18431.40 and $17,456.40 followed by a third buy on Friday at $16,438.50 giving me an average $17,528.26 price (a reduction of -4.9% from my $18,431.40 starting point).

Professionals will typically warn against this technique, calling it “Catching a Falling Knife.” However, in that technique, traders try to guess the bottom going in with a full position buy during an asset’s pullback. With Bitcoin’s selloffs, I choose to nibble at key points, waiting to add larger quantities to my position until we see more dramatic pullbacks of 30% and greater. If Bitcoin doesn’t sell off excessively, then the position I end up with is the one that I trade with. I take what the market gives me.

If Bitcoin does sell off to some of its historical extremes, I’ve prepared for it in advance by developing my trading plan. In fact, my current plan accounts for scenarios even if we see Bitcoin crash through 2018’s low near $3130 and heads even lower from there.

The key to this strategy is planning and patience. My first buy is so small that it feels like a waste of time, however, I always have the choice to add more to my position should the high-quality problem happen of the position heading up after my buy, not down. 

In addition, I calculate my buys to ensure my total position is never down more than -20% after my next buy point, allowing me to lighten up if Bitcoin bounces 20%+ and hitting my break-even where I’d lighten up some using stop-limits in case Bitcoin continued its bearish downturn. Even in Bear Markets, Bitcoin regularly bounces anywhere from 20%-50% before continuing its downward move, allowing traders to either take profits or lighten up.

It’s hard to know how much further downside Bitcoin has in store but given its epic rally over nearly three months with no giveback, the Bears might try to teach newcomers to the space a lesson – with a market this volatile, extreme risk aversion must be practiced otherwise crypto markets will rip your face off.

Bitcoin Buying Targets

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

0.322% @ $15,159
0.302% @ $14,479
0.302% @ $14,038
0.503% @ $13,658
0.604% @ $12,829
0.906% @ $11,388
1.510% @ $10,218
2.013% @ $9467
2.013% @ $8958
2.698% @ $8188

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.

• 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 crashed nearly -63% to a low of $3858.00, mostly in 24 hours.
• From March 2020, Bitcoin rallied +405% to $19,500.00 in November 2020.

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 fully 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. If a speculator isn’t confident in the space, the moves will cause mistakes to be made.

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.