Summing Up The Week

Thanks to Martin Luther King, Jr. Day on Monday, the markets had a shortened week. Everything seemed to be moving along swimmingly – despite negative news from Boeing early in the week – until the first U.S. case of the Wuhan Coronavirus was found… and then the second.

By the end of the week, markets didn’t quite know how to react to the news as pandemic outbreaks like H1N1, SARS, and MERS dramatically reduce travel and consumer spending as consumers stay home out of fear for getting sick.

Plus, the United Nations believes Saudi Arabia hacked Amazon (AMZN) CEO Jeff Bezos’ iPhone?!

Read on to the see the news that moved the markets this week… 

Market News

Wuhan Coronavirus Makes U.S. Landfall

The 2019-nCoV Wuhan Coronavirus, a deadly virus which has killed more than a dozen people and sickened hundreds of others in China, has been found in the United States, reported CNBC on Monday.

A male traveler to China was diagnosed in Snohomish County, Washington. Officials said the sick male, in his 30s, is “very healthy” and is currently being isolated at a medical center in the state “out of caution” and “poses little risk to the public.” He returned from a trip to China on January 15.

2019-nCoV presents with symptoms similar to pneumonia including fever, coughing, and shortness of breath. Typically, coronaviruses infect animals, however this new strain appears to have evolved to spread to humans.

The markets sold off early in the week on fears that the Wuhan coronavirus could disrupt travel and commerce, slowing economic growth through global markets.

On Wednesday, the World Health Organization (WHO) tried to contain public fear as the Wuhan outbreak – and increasing deaths – spread throughout China.

On Thursday, CNBC reported that China’s virus death tool had risen to 17 people, that the virus had infected more than 600, and that China’s lockdown to contain the virus is considered “unprecedented” when compared to past virus containment.

On Friday, markets sold off substantially when the CDC confirmed the second U.S. case of 2019-nCoV, this time in Chicago, Illinois, reported CNBC. Although the indexes rebounded slightly from their lows, the selloff was the most substantial the markets have seen in weeks.

Boeing: Max in Mid-2020. FAA: Actually, Maybe Sooner…

Boeing (BA) told airlines and suppliers that it doesn’t expect regulators to sign off on the 737 Max until the middle of 2020, reported CNBC on Monday.

The new delay is months longer than the manufacturer previously expected and the release of the news caused BA’s stock to drop more than -5% during Monday trading.

Whereas ex-CEO Denis Muilenberg repeatedly provided estimates for the 737 Max’s return that were far too optimistic, Boeing’s new approach is based on previous experience with the certification process.

“It is subject to our ongoing attempts to address known schedule risks and further developments that may arise in connection with the certification process,” Boeing said in a statement.

On Wednesday, Vertical Research Partners, an analyst firm, announced that it had lowered its price target on Boeing to $294, that it was “belatedly downgrading the stock,” and that it was “throwing in the towel” following a cascade of negative news events from the company. 

Later on Wednesday, Boeing announced that it wants to resume 737 Max production months before the planes return to service, presumably to make use of the hundreds – if not thousands – of employees Boeing has dedicated to keeping on the payroll rather than laying off qualified employees.

In an interesting turn of events, however, the Federal Aviation Administration came out on Friday and announced that the 737-Max could be recertified before mid-year, reported CNBC.

Prior to new CEO Dave Calhoun’s entry into Boeing, the company was regularly at odds with the FAA as the company’s timelines were far more optimistic on the plane’s return to service.

Friday’s announcement from the FAA indicates that the agency may approve of the change in leadership, and that the 737-Max may, indeed, be closer to a return to service than previously thought.

UN calls to investigate Saudi Arabia for Amazon CEO Hack

The United Nations called for an immediate investigation into the “possible involvement” of Saudi Crown Prince Mohammed bin Salman in the hacking of Amazon CEO Jeff Bezos’ iPhone in 2018, reported CNBC on Wednesday.

Bezos, through his security consultant Gavin de Becker, flatly accused the Saudi government of wanting to do him harm.

In March 2019, De Becker alleged that the Saudis had “access to Bezos’ phone, and gained private information” that the government was “intent on harming Jeff Bezos since… the [Washington] Post began its relentless coverage” of the brutal murder of Saudi journalist and critic Jamal Khashoggi in October 2018.

While not necessarily market-moving news on its own, Saudi Arabia has been trying to break into the world’s economic markets, recently publicly listing Saudi Aramco, the nation’s oil producing company, in a failed IPO.

Saudi Arabia couldn’t find any international market willing to list their company and had no choice but to list it on their own local stock market, allegedly filled with corruption and false data.

Next Week’s Gameplan

As horrifying and traumatic as pandemic diseases are, historically, the World Health Organization’s gotten pretty good at containing them. In addition, they tend to be fantastic buying opportunities in the stock market as many companies with no exposure will sell off with the rest of the markets.

Accordingly, I’m following my Stock Shopping List, adding to positions when they hit specific levels. It’s worth noting that companies with direct exposure – think travel stocks, airlines, casinos, cruiselines, and theme parks – will get hit much harder during these kinds of crises and will take longer to rebound than the rest of the market.

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 made a new weekly high over the past week trying to break $9200 and just barely not making it at $9194.99 before dramatically reversing course and heading back down.

Bitcoin’s weekly low was just made earlier today (Friday, January 24) at $8216.71 before it reversed to stabilize in the $8500 range.

Analysts are all over the place on Bitcoin (no surprise there, right?) with some claiming Bitcoin’s inability to break through resistance (see the Line That Shall Not Be Crossed incoming) means that Bitcoin will crash with some Bears claiming $1,000 price targets once again.

In the meantime, Bulls are coming out of the woodwork on CNBC, claiming that Bitcoin will double before the end of 2020 thanks to the “Halving” which will take place mid-year, reducing the number of Bitcoin produced for miners each day by half of its current figures.

Bitcoin Gameplan

On Thursday morning, I took the opportunity to add a little back to my Bitcoin position when it lost its footing and dropped below $8400. Obviously, I was a little early as Bitcoin made it further down to $8216 before finding support.

However, I felt I sold off a bit more of my allocation than I wanted to at higher levels, so the buy increased my allocation back to a slightly more comfortable 5.28% of my total desired allocation. The purchase also raised my per-coin cost by +0.57% from $7823.54 to $7868.35.

As of the price of this writing, my position has a gain of +8.05%. 

Bitcoin Buying Targets

Here are my next ten (10) target buying quantities and price targets from here:

0.33% @ $7271
0.31% @ $6963
0.28% @ $6228
1.11% @ $5887
2.21% @ $5465
2.69% @ $5077
5.54% @ $4496
12.91% @ $3227
14.29% @ $2578
17.34% @ $2076

Bitcoin Selling Targets

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

8.65% @ $10,268 (+30.00%)    <– Key resistance trendline
10.93% @ $12,983 (+64.50%)    <– Nearing 2019 High
14.30% @ $17,031 (+115.95%)  <– Key Fibonacci Retracement Resistance
17.43% @ $20,733 (+163.00%)  <– Predicted Fibonacci Retracement Point #1
21.69% @ $25,828 (+227.75%)  <– Predicted Fibonacci Retracement Point #2
28.14% @ $33,480 (+325.00%)  <– Predicted Fibonacci Retracement Point #3

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.