Summing Up The Week

Monday’s epic selloff was expected, however Tuesday’s start of a rally was unexpected – making many think the market is far more resilient… until Friday when sources reported that U.S.-China Trade Talks have stalled.

Of course, the majority of the market-moving news had to do with trade, so let’s take a look at what happened this week.

Market News

He Said, Xi Said

In what’s going to become a regular theme for the markets, Chinese President Xi claimed “You backed out!” to Trump following Trump’s decision to raise tariffs on Chinese goods on Friday and put trade negotiations on hold, reported CNBC on Monday before the bell.

If there’s one thing the markets hate, it’s uncertainty, so the Xi announcement caused market futures to sell-off dramatically into the start of the week.

And, the futures didn’t lie. By the end of Monday’s trading day, the S&P closed down -2.41% or 69.53 points, the Dow was down -2.38% or 617.38 points and the Nasdaq was down -3.41% or 269.92 points.

You know it’s bad when perma-bull Jim Cramer says “You better strap yourself in.”

Cramer to Trump: “Stop Tweeting!”

The markets rebounded on Tuesday following Monday’s epic sell-off with Jim Cramer telling CNBC: “Trump must stop tweeting if he wants the Dow to start going up” on Tuesday morning.

Many analysts, Cramer included, believe Trump sees the Dow Jones Industrial Average (DJIA) as his report card, adjusting his presidential behavior to improve the DJIA when it suffers significant drops.

Negative tweets from Trump have caused market uncertainty, resulting in steep sell-offs as a result of his more … controversial … approach to negotiations.

Trump Hassles Huawei

In a direct attack on China trade on Thursday, Trump banned most U.S. companies from doing business with Huawei, the major Chinese technology manufacturer and maker of laptops, cell-phones and other forms of consumer and enterprise technology.

Although this definitely limits China’s technology industry’s growth and sales, it also cuts deeply into the U.S. manufacturers of semiconductors and other related technology producers. Major semiconductor producers Qualcomm (QCOM), Xilinx (XLNX) and others felt the pain.

Trade Talks have Stalled

Sources told CNBC on Friday that the U.S.-China Trade Talks appear to have stalled completely, with no discussions scheduled between the two administrations at this point.

Both sides are ramping up their approaches to the Trade War, with the U.S. raising tariffs on pretty much everything from China, and China trying to do the same … except they don’t import much besides agriculture products.

The Trade War will likely continue for a long time to come.

Although prices may increase in the U.S. on consumer products, analysts believe China has more to lose since it relies on the rest of the world to buy their goods while importing very little.

That being said, U.S. semiconductor companies and Apple (AAPL) could be in for a world of hurt until some agreement is reached.

Uber (UBER) Drops 20% from IPO then Bounces 20%+?!

Uber’s (UBER) IPO was an utter disaster, dropping -19.82% from its $45 initial price down to $36.08 during Monday trading. 

Naturally, the finger-pointing for who’s to blame for the IPO’s complete failure started on Tuesday with many claiming fault lies at the feet of Morgan Stanley, the investment bank who handled the deal, reported Yahoo Finance.

Then, on Thursday, Uber jumped 22%+ from its $36.08 low to $44.06 before pulling back. On Friday, UBER settled around the $42.00 range, down a little more than -6% from its IPO price but up +16% from its $36.08 low. Where to next?

If you ever wondered why Get Irked recommends avoiding IPOs for some time after they launch, here’s the reason: with no previous price action, it can be virtually impossible to have any idea what a brand-new stock is going to do as buyers and sellers try to determine it’s worth. Jump in and you risk getting caught in the crosshairs of the bulls, the bears or both!

As we said last week, we’re not a fan of UBER or Lyft (LYFT), its ride-sharing competitor. Betting that everyone will get rid of their cars entirely and use ride-sharing exclusively as the only path to profitability for either company seems like a fool’s errand to us.

We won’t be investing in either company. If we end up being wrong and one (or both) of them skyrockets to the moon, we won’t be sad about missing out one bit.

Risk management is the #1 priority in investing, and neither of these companies presents a reasonable risk with both warning no path to profitability in their IPO documents.

Next Week’s Gameplan

The market’s defined a new era for investors – volatility is now the norm. Given that it can be difficult to determine what’s going to happen next, developing a trading plan for any scenario has become key to success.

We continue to modify buying and selling targets to accommodate this newfound volatility, and it’s certainly challenging! However, volatility can bring upside surprises along with the downside disappointments so at least it’s never boring, right? 

This Week in Play

Stay tuned for this week’s episodes of our Investments in Play and Trades in Play coming online later this weekend! 

Crytpo Corner

Bitcoin Price Action

Cryptocurrency continues to be the most insane and unpredictable market in history. Over the past week, Bitcoin jumped an additional 30% to hit a new high of $8388.00, a remarkable gain of 62.25% in just a month.

However, Bitcoin has started pulling back substantially from that high, already seeing a daily low of $6600 in the past 24 hours as of the writing of this update, a drop of -21.32% from its $8388.00 high.

In reviewing Bitcoin’s historical price action, significant pullbacks of 30-60% from a high are not unusual in Bitcoin (as we’ve been saying for weeks now… sigh) so levels of $5900, $5000, $4200, $3350 or even lower than Bitcoin’s $3128.99 all-time 2018 low are all very much possible from here.

Crypto in the News

From Bitcoin’s “a Fraud” to Bitcoin’s “Alive and Well”

Mark Mobius, cofounder of Mobius Capital Partners, and renowned investor changed his mind about Bitcoin this week, saying that the asset will continue to be “alive and well” into the future after claiming crypto as a fraud not long ago, reported Forbes.

This kind of change in perspective isn’t unheard of but it’s certainly unusual. With such reputed investors flip-flopping on their views of Bitcoin, does this mean the space is safe?

Bitcoin Gameplan

Let’s say a speculator wanted to put money to work in Bitcoin. The speculator could put all the money to work at one level, but that would expose a significant amount of downside risk.

The speculator could wait until Bitcoin’s price appeared to bottom, but it’s possible the price would bounce so quickly that the speculator would miss out entirely.

Rather than buy in all at once, the speculator could start very small and buy bigger orders as the price dropped, a technique called both Buying in Stages but also carrying negative connotations, referred to as trying to catch a falling knife as an asset can always continue falling until it hits $0.00

With a potential drop to under $3000 a very real possibility in Bitcoin, the speculator would want the biggest orders placed close to the possible bottom in order to pick up the most quantity for the least amount of capital. 

A simple example:

• 1st Buy: 1% of desired allocation @ Down -20% from the high
• 2nd Buy: 2.5% buy @ Down -25%
• 3rd Buy: 5% buy @ Down -30%
• 4th Buy: 7.5% buy @ Down -35%
• … and so on.

Regardless of how a speculator approaches the crypto space, risk management is the top priority. This asset class redefines concepts of volatility with 60% pullbacks or more a common occurrence – something that rarely occurs, if ever, in any other asset class.

When speculating in Bitcoin or any other crypto, take extreme caution as huge losses are a very real and very common possibility.