Summing Up The Week

The week started off calmly enough with the Santa Claus Rally carrying on as is historically typical – the markets drifted upward into New Year’s and through Thursday trading – until news broke Thursday evening that a top Iranian commander was killed during a U.S. drone strike.

The markets sold off relatively substantially at the open on Friday, regained some strength during morning trading, but started to lose ground as the day continued.

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

Market News

Trump says Phase One will be signed on Jan. 15

President Trump tweeted that he will sign the “phase one” trade deal with China at the White House on January 15, 2020, reported CNBC on Tuesday.

Given how these negotiations have been going up until this point, it may be important to take this tweet with a grain (or bag) of salt as potential trade deals between China and the U.S. have fallen through at the last second repeatedly up until this point.

The markets exhibited no reaction as the year-end rally tapered off on the 30th and 31st, perhaps from profit-taking or maybe just because everyone’s looking at far the markets have come and is hesitant to put any new money to work.

Top Iranian General Killed in U.S. Drone Strike

Iran’s top commander General Qassim Soleimani was killed in a U.S. drone strike in Baghdad, reported CNBC on Thursday night.

The Pentagon confirmed the action following a two-day attack on the U.S. embassy which prompted President Trump to deploy nearly 750 U.S. soldiers from the 82nd Airborne Division to the Middle East.

Historically, international strife causes oil prices to surge and Thursday’s announcement was no different with Brent crude rising 3.98% to $68.90 per parrel and U.S. crude rising 3.87% to $63.55 per barrel.

Further macroeconomic tension could be the catalyst to cause U.S. investors to take profits following one of the most epic short-term bull rallies in history.

Manufacturing Economy Weakest in a Decade

The Institute for Supply Management (ISM) released its December numbers, showing a drop to 47.2 in December, its lowest level since June 2009, reported CNBC on Friday.

While this shows a significant contraction in manufacturing activity, much of the cause relies entirely on the U.S.-China Trade War. “Global trade remains the most significant cross-industry issue,” said ISM Chair Timothy R. Fiore.

The manufacturing economy hasn’t been the key driver for the recent rally in stocks, however, if the spike in oil prices continues, the resulting pressure may weaken the U.S. consumer which has been the driver for the stock market rally, and may indicate the possibility of a substantial selloff sooner rather than later. 

Next Week’s Gameplan

Global international strife always throws a monkeywrench into future plans for the markets, particularly when that strife involves any of the countries in the Middle East.

Throw oil into the mix and everything gets more than a little unpredictable.

In these scenarios, it’s best to refer to an adage Jim Cramer of CNBC’s Mad Money likes to throw around, “What does that news event have to do with the P/E ratio of Bristol-Meyers (BMY)?” In other words, if the international events don’t have direct effect on your stocks, it may be time to add to the position, not run from it.

That being said, given how overbought the markets were headed into this event from the epic year-end rally, many analysts believe we’re due for a sell-off from profit-taking. Combined with a potential panic selloff from a global event, and we could be in for a very volatile January starting next week.

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

Important Disclaimer

Get Irked contributors are not professional advisers. Discussions of positions should not be taken as recommendations to buy or sell. All investments carry risk and all readers must accept their own risks. Get Irked recommends anyone interested in investing or trading any asset class consult with a professional investment adviser to determine if an investment idea is suitable to them and their investment goals.

Bitcoin Price (in USD)


Weekly Change

Bitcoin Price Action

Bitcoin’s price action continued to act incredibly strangely over the New Year.

I know – Bitcoin already acts strangely, how much stranger could it get? 

On New Year’s Eve, continued weakness in Bitcoin from its failed attempt to break its $7688.99 weekly high (it only made it to $7531.00 on Sunday) caused the crypto to once again retest the Support of Last Resort trendline, not once but twice – once on New Year’s Eve (December 31) and then again on New Year’s Day (January 1) before seemingly breaking all support on Thursday in a precipitous Bearish decline.

However, the Bulls were determined to maintain support with significant buying creating a 6%+ pop in 2-1/2 hours from its $6854.67 low (almost directly on the Support of Last Resort on the Monthly timeframe) to pop to $7281.24.

At this point, it’s apparent that the battle between the Bulls and Bears over the Support of Last Resort is raging strong, however, it’s still difficult to know which way Bitcoin will break from here. Will the Bulls have enough strength to fight higher or will the Bears weaken the Bulls enough to force Bitcoin lower.

If the Bears win, Bitcoin’s looking at the Next Support of Last Resort with lows possible anywhere from the $4800-$5100 range depending on where the support line kicks (Monthly shows a ~$4800 low where Daily shows $5000-$5100).

If the Bulls win, the Line That Shall Not Be Crossed is incoming with resistance at the $9700-$9800 mark. If the Bulls can break through resistance, then the next battle could be $13,800-$14,000, the high of 2019.

Bitcoin Gameplan

The fight between the Bulls and Bears is escalating which means the next move will likely be a big one – in one direction or the other. Best to have plans for both scenarios in place (No surprise there, right? That’s basically my M.O.).

My Bitcoin position hasn’t changed in several weeks now as the price consolidation hasn’t moved toward my buying or selling targets. I currently hold 7.13% of my entire potential allocation with an average per-coin cost of $8,045.39 (down ~11%).

Bitcoin Buying Targets

Here are my target buying quantities and prices from this point:

0.28% @ $6323
7.20% @ $4864
6.92% @ $4302
14.26% @ $3607
14.78% @ $2352
10.74% @ $2055
13.72% @ $1811
24.97% @ $1287

Bitcoin Selling Targets

Here are my target selling quantities and prices from this point:

6.01% @ $9,695 (+20.0%)    <– Key downward trendline
7.26% @ $11,706 (+45.0%)    <– Additional resistance trendline
8.22% @ $13,265 (+64.4%)    <– Approaching 2019 High
12.83% @ $19,751 (+145%)  <– Approaching All-Time High (ATH)
65.67% @ $29,969 (+272%)  <– Ridiculous target at upper trend-line

While neither buying nor selling targets are set in stone, it’s far more likely that I’ll get stopped out before hitting my higher selling targets; it never hurts to dream, right? 😉

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. The greater the pullback, the more likely a rebound becomes. Therefore, higher price points have a lesser likelihood of rebounding than lower price points and deserve a smaller quantity buy in order to practice conservative risk management, a requirement for the sector.

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 rebounded 343% from $3128.89 to $13,868.44.
  • Since June 2019, Bitcoin has dropped -53.64% to a low of $6430.00 in December 2019.

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 only 1.8% 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.

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