Summing Up The Week
The stock market continued to rocket higher this week, closing out April with the best monthly results seen in 33 years.
Given all the negative headwinds, particularly the unknowns of how COVID-19 will affect the economy, the exuberance made many question the rally even with positive news that a treatment for the coronavirus may be in play from Gilead Sciences (GILD).
On Friday, the markets sold off, but much of that may have been profit-taking given that it was the beginning of a new month and April had been insane with bullish action.
Let’s look at the news that moved the markets…
Market News
LA Lakers Receives SBA Loan; Mnuchin Promises Audits
Following news on Tuesday that the NBA Basketball Team the Los Angeles Lakers nearly valued at $4 billion, applied for and received $4.6 million from the Small Business Administration Loan’s Payroll Protection Program (PPP), Treasury Secretary Steve Mnuchin promised full audits of any company receiving $2 million or more from the program, reported CNBC on Tuesday. The Trump Administration has desperately tried to close giant loopholes in the PPP when backlash about the number of publicly-traded companies applying for funds intended for America’s small business owners flooded the airwaves last week. While the Los Angeles Lakers ended up returning the funds after significant fan backlash, Tuesday’s news about them applying for and receiving the millions intended for small business simply solidified the SBA’s complete ineptitude at implementing even the most basic of targeting for the program.Fauci on Remdesivir for COVID-19: “Quite Good News”
The markets skyrocketed on Wednesday when White House health advisor Dr. Anthony Fauci said the data from Gilead Sciences’ (GILD) Remdesivir drug trial on COVID-19 showed “quite good news” reported CNBC.
The data follows a leaked report from China by the World Health Organization (WHO) last week claiming Remdesivir demonstrated no true benefits on COVID-19 patients.
The positive results from this week’s trial further demonstrate concerning falsehoods and outright lies released by the Chinese government, who continually demonstrate incompetence in running proper medical research and drug trials.
Furthermore, these results add to concerns that the WHO is closely tied to the Chinese leadership and is willing to spread misinformation despite claiming to be an unbiased international medical organization.
3.84M in Jobless Claims Brings Total to 30M+
With 3.84 million in additional jobless claims on Thursday, higher than economist expectations of 3.5 million, the six-week figure is now 30.3 million, reported CNBC.
Last week’s numbers evaporated the 22.4 million new jobs created since the Great Recession in 2008-2009, however, this week’s numbers bring the total jobs destroyed to 30.3 million, 7.9 million lost due to the global pandemic now gaining on the 8.7 million jobs lost during the Great Recession.
The unexpectedly higher number of job losses caused the markets to sell off during Thursday morning trading.
Next Week’s Gameplan
With the market finally topping off on Friday, we’re back in a waiting game to see where the market wants to go next. If it heads higher, then I’m firmly staying in Selling Season, looking for opportunities to take profits.
If Friday’s selloff is an indication of further weakness, we’ll be in No Man’s Land for awhile until real weakness shines through and gives way to buying opportunities.
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.
Click chart for enlarged version
Bitcoin Price (in USD)
%
Weekly Change
Bitcoin Price Action
After spending the past week consolidating, Bitcoin broke free to the upside, rocketing skyward and breaking through the Line That Shall Not Be Crossed, setting a new weekly high at $9478.66 and a low at $7672.00.
The Bullish Case
In addition to the Halvening upcoming later this month, Bulls are once again claiming that Bitcoin is correlated with the markets as money rushed into the stock markets from the sidelines to take advantage of April’s rally in equities.
Due to this supposed influx of new funds, Bulls believe that Bitcoin will continue higher and that the lows are in with some analysts suggesting Bitcoin will never drop below $7000 again (a claim that we’ve heard so many times before that it’s become laughable…).
The Bearish Case
Bears claim that speculators are pumping Bitcoin’s price and that the crypto market is in another bubble that’s ready to burst. While April’s monthly high did set a higher-high compared to March – typically a bullish sign – now that we’re in May, a new month, the possibility that the market will try to set a higher-low is very real.
Given that Bitcoin’s last monthly low was $3858 set in March, there’s a lot of room for some serious volatility in the coming weeks.
Bitcoin Gameplan
Trade closed for +24.85% in gains in 20 days
Once Bitcoin cracked through the Line That Shall Not Be Crossed, I started taking profits, eventually using closing out my position between $9055-$9170 on Wednesday, April 29. As always, I keep my profits in the crypto I trade so I can get exposure should there be further upside without risking my investing capital.
This trade lasted just 20 days from April 9 to April 29 and netted me 24.854% in gains on a 2.5% allocation. Overall, I added 0.6% of the entire portfolio to my Bitcoin wallet. While that seems small, that amount works out to an 11.34% annualized gain; I’ll happily take that every day and twice on Sundays.
New trade opened on 4/30/2020
Current Allocation: 2.143%
Current Per-Coin Price: $8,640.46
Current Status: +1.466%
After closing the trade on Wednesday, I set new limits to re-enter which were filled early Thursday morning when Bitcoin lost its momentum and began price consolidation. Small buys filled at $8777, $8558, and $8428 giving me a 2.143% allocation with a decent per-coin price of $8640.46.
Bitcoin regained some momentum on Friday, putting my trade slightly in the green.
Bitcoin Buying Targets
Based on past support levels and Moving Averages (both Simple and Exponential), I’ve come up with the following price targets and quantities:
0.536% @ $7963
0.536% @ $7486
0.536% @ $6981
0.536% @ $6463
0.536% @ $6138
1.416% @ $5668
1.453% @ $5346
6.457% @ $4252
6.133% @ $3803
2.034% @ $3667
Bitcoin Selling Targets
The new trade is still very young and only in the building stages. Just like the trade I closed this week, I’ll wait until I can lock in profits in excess of 20-25% before using stop-losses to close it out.
In the meantime, I’m going to wait and see which way this rally is headed 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 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.
- In March 2020, Bitcoin dropped -63.33% to a low of $3858.00, mostly in 24 hours.
- From $3858.00, Bitcoin has rebounded +145.69% to $9478.66 in April.
- 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.
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