Summing Up The Week

The market rally which seemed impossible when it started last week only gained momentum throughout this week until President Donald Trump finally put a stop on things when he announced his press conference “on China” during trading on Thursday.

However, Trump’s conference lacked the fangs that concerned investors, so the market returned to rally mode, continuing to ignore any and all potential bad news out there.

Let’s take a look at what moved the markets this week…

Market News

New Vaccine & Economic News Sends Markets Soaring

After returning from the three-day Memorial Day weekend on Tuesday, the markets kicked off the shortened trading week with a massive rally as investors eyed Novavax’s (NVAX) vaccine candidate and economic activity from states reopening economies, reported CNBC.

Before the bell on Tuesday, Dow futures were up 600 points and the S&P was on-target to meet or exceed its 200-day moving average with a 1.8% gain. Analysts pointed out that a jump above the 200-day average could signal a change in the long-term trend of the markets from bearish to bullish.

Housing Sales in April Went… Up?!

Tuesday’s rally gained even more steam after the U.S. Census reported that sales of newly-built rose nearly 1% in April over March compared to expectations that sales would fall 22%, reported CNBC.

The move surprised even real estate analysts and specialists who pointed to low mortgage rates and “urban flight” (the desire for those living in cities to move away from the center for more outdoor space) for the increase in sales.

While a 1% month-over-month increase might not sound impressive, the report represents a 23% jump over expectations. The rally on Tuesday, already well underway, continued higher following the report.

Trump Goes After China… Sort Of…

On Thursday afternoon, President Donald Trump announced he would hold a news conference “on China” on Friday, an announcement that immediately doused the fiery market rally and sent the indexes into tailspins into the close, reported CNBC.

With no real items to report, analysts went wild, suggesting that Trump may take a more serious turn in response to the proposed Chinese security law that would threaten Hong Kong’s independence; the border dispute between China and India which Trump has offered to mediate; or legislation awaiting Trumps signature concerning China’s treatment of Uyghur ethnic minority citizens.

However, on Friday, while Trump did say during his conference that he would take action to eliminate special treatment toward Hong Kong, he did not indicate the U.S. would pull out of the phase one trade agreement, resulting in the market rallying off session lows on Friday, reported CNBC. 

Next Week’s Gameplan

If the markets continue their overexuberant high-flying insanity next week, then it’s still Selling Season with my goal being to take profits wherever and whenever I have them.

If you check out my long-term Investments in Play episode coming out this weekend, you’ll see that all I did this week for the long-term was peel off profits basically EVERYWHERE as investors throw caution to the wind and simply buy, buy, buy…

The name of the game here is Warren Buffett’s quote: “Be fearful when others are greedy and greedy when others are fearful.”

To be clear, others are very, very greedy right now…

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 had quite the exciting week, breaking through the Support of Last Resort to make a new weekly low at $8632.93 right around the Line That Shall Not Be Crossed before bouncing +9.14% off the low to end the week with a +3.40% gain over last Friday’s corner.

The Bullish Case

Trendlines of Resistance and Support are often looked at as key indicators of whether an asset is bullish or bearish. When an asset crosses up through a line of resistance, tests it and bounces off of it, that line of resistance is often converted to a line of support. 

In the case of Bitcoin, the fact that the crypto appears to have found support from the Line That Shall Not Be Crossed could be very positive, indicating that Bitcoin is finally ready to make new highs above 2019’s $13k high.

The Bearish Case

Bears will point out that Bitcoin was unable to break its monthly high of $10,079.00 as an indication that we can expect more downward moves in order for any additional upward momentum to be gathered. For this week, Bears will suggest that Bitcoin will test its $8632.93 and likely break through.

If $8632.93 doesn’t hold, the next support is the Next Support of Last Resort (?) line, currently around $6700-6800 followed by the Some Support of Any Resort line down at $4000.00 (and, of course, the 2020 low of $3858.00 after that).

Bitcoin Gameplan

Position closed with +6.696% gains, New at $9039.59

Current Allocation: 1.853%
Current Per-Coin Price: $9,039.59
Current Status: +4.234%

When Bitcoin started to show strength on Friday (May 22) evening, I used stop-loss orders to lock in gains when it lost support, taking in profits of +6.696% on the position I opened back on April 30, not bad in less than a month. The profits (kept as Bitcoin and transferred off-network, of course) add +4.09% to my holdings.

Over the course of the week, I started a new position, adding as Bitcoin dropped into the $8000s. My current allocation is 1.853% of my entire desired amount with an average per-coin price of $9,039.59.

Thanks to the bounce, my position is up a relatively marginal +4.234%.

Bitcoin Buying Targets

Using Moving Averages and the $3858.00 monthly low as guides, here’s my plan of buying quantities and prices:

0.408% @ $8447
0.904% @ $7576
1.357% @ $6762
1.499% @ $5819
3.449% @ $5007
4.293% @ $4453
5.890% @ $3989
7.176% @ $3634
12.603% @ $3217
12.209% @ $2693

Bitcoin Selling Targets

As is my regular plan of attack, if Bitcoin pops to a new level and consolidates where I can lock in gains of 20-25% without setting stop-losses too close to the price, I will close the position, otherwise, I’ll ride it down and accumulate as we go.

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 +161.25% to $10,079.00 in May.
• 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.