Summing Up The Week

Coronavirus news is still the main market mover, however significant fear hasn’t really taken hold as buyers rush into buy every selloff.

Apple (AAPL) and Coca-Cola (KO) both warned that the coronavirus would affect their earnings this year, and the Fed minutes showed no plans for rate changes until data changes.

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

Market News

Sharp Increase in Coronavirus Cases causes Sell-Off

On Thursday, a report from the Chinese state-run newspaper, the Global Times, said there had been a sharp increase in coronavirus cases. The timing of the story did not directly match with Thursday’s move lower, but CNBC theorized that it tapped the market’s fears about the coronavirus slowing the global economy.

One analyst said he believed the recovery will be U-shaped, not V-shaped, which means the market would see a longer slump before global growth returned to normal.

On Friday, CNBC reported that Coca-Cola (KO) announced it would take an earning hit due to coronavirus global growth slowing. While the coronavirus news and potential global slowdown are still causing the selloffs, the selloffs are surprisingly shallow with many investors and traders buying the dips.

Fed Likely to Leave Rates Unchanged

The Fed minutes released Wednesday from its January 28-29 meeting indicate it intends to hold interest rates steady, reported CNBC.

The minutes addressed the current stance of monetary policy, referring to it as “appropriate” and argued that holding current rates “would give the Commitee time for a fuller assessment on the ongoing effects of economic activity of last year’s shift to a more accommodative stance.”

Officials also made several mentions of the potential economic impacts from the COVID19 coronavirus.

Apple Warns Revenue will see Coronavirus Effects

Apple (AAPL) announced that it does not expect to make its quarterly revenue forecast due to low supplies and demand resulting from the coronavirus, reported CNBC.

While the announcement caused semiconductor companies who provide Apple with components to sell off on Monday, the majority of the market remained relatively flat.

Apple’s announcement could be just beginning of cracks showing in the global economy due to the virus, particularly if more companies begin to announce slowing sales in the coming days and weeks.

Next Week’s Gameplan

The gameplan continues unchanged – I’m adding very slowly to a small number of specific positions which are seeing weakness, but I’m not in any hurry to put money to work.

The markets can continue overbought for a very long time, but the action feels so frothy that my feeling is when we see a true selloff, it’s going to dramatically shake out the weak hands in a big way.

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

The last week was definitely a spicy one for Bitcoin, selling off dramatically through much of the week and, as I thought might happen, testing the Line That Shall Not Be Crossed before making a weekly low of $9280.98.

The LTSNBC appears to have changed from resistance (keeping Bitcoin from headed higher) to support as Bitcoin bounced from the line on Thursday and through much of the day Friday.

While some analysts believe Bitcoin is in a Bullish pattern and heading much, much higher from here, others theorize that a second or third test of the LTSNBC could cause the support to break. Should the support break, we’d likely be looking for a re-test of the Support of Last Resort, now rising to the low $8,000 level. 

Bitcoin Gameplan

As tempting as it was to buy Bitcoin’s selloff when it tested the Line That Shall Not Be Crossed, my trading discipline for cryptocurrencies doesn’t allow me to add to a position above my per-coin cost, so the week was a lot of hand-sitting for me.

I continue to hold a 0.8% allocation in Bitcoin with a per-coin cost of $9031.94. My position is still up with a marginal profit of about +7.63% at the time of writing. I also continue to hold small positions in three other altcoins – Bitcoin Cash (BCH), Ethereum (ETH), and Litecoin (LTC), but since this sector trades together, I will still only be discussing Bitcoin in these updates.

Bitcoin Buying Targets

Using a combination of moving average, trendline, Fibonacci Analysis, I’ve come up with the following ten (10) buying targets:

0.400% @ $8981
1.011% @ $8847
1.106% @ $8137
1.106% @ $7687
1.106% @ $7377
1.106% @ $6667
1.106% @ $6133
1.371% @ $5816
11.432% @ $4037
15.998% @ $3227

Bitcoin Selling Targets

Just like the past few weeks, I still have no upside targets at this time with such a small allocation. 

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.
• From June 2019, Bitcoin dropped -53.64% to a low of $6430.00 in December 2019.
• From December 2019’s low, Bitcoin rebounded +64% from $6430.00 to $10,522.51.

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.