The Wolf Den #168 - Trading Tips
Bitcoin Thoughts And Analysis
The Bitcoin chart is difficult to read at the moment. While the move from the bottom on the bullish divergences was somewhat easy to predict, everything after that has been effected by the "Elon Musk pump" which was somewhat "broken" the chart on low time frames for me. Price broke the wedge we were watching, only to fall back in. It also broke out to "confirm" a double bottom and to break the top half of the trading range that I had shared. It fell back below both.
At the moment, I view Bitcoin as chopping sideways and resetting. I can't imagine confidently taking a position here in either direction in the short term.
MONTHLY CHART
The monthly close was... decent. For a while, it appeared that it would end as an ugly shooting star, which would only matter if February had a down candle. Then price moved back up the candle on the "Elon Musk Pump." It fell back down part of the way to give us the present look. I do not love the long upper wick, but in and of itself it's not a big deal. We will really have to wait to see what this month has in store.
DAILY CHART
The move to 38K did offer a bit more clarity, as it gave us a perfect bull flag on the daily. A break of the top of this should send price absolutely flying to much higher targets, so I will be tracking that closely. But for now, price could go either way in the short term, even to the bottom of the flag. So this is not tradable yet.
The flag is confirmed with 2 touches up and 2 touches down and a perfect parallel channel.
Price is currently trading in the top half of the flag, which is generally bullish.
4-HOUR CHART
This was the failed descending wedge that we were watching for weeks. It happens. Price fell right back in after the "Elon Musk pump." But as you can see now on the daily, it formed a clearer pattern - a bull flag.
Altcoin Charts
OMG/BTC
I have been watching this one for a while, ever since it bounced out of the blue demand zone. My alarm went off this morning on the break of the black line. A breakout trader would have bought this already, right when it crossed the line. The safer way is to wait for a close to confirm the break, and then to buy there or on a retest of that descending line as support. The even safer play here is to wait for a break of 1323, the horizontal resistance, and to try to buy a retest of that line as support. It's all about your own preference and level of risk.
Legacy Markets
XAG (SILVER)
I have been sharing silver trades for over a year, including last week in the Thursday newsletter and the weeks before. There's been a lot of chatter around this being the next "short squeeze" but it seems somewhat clear that that has not actually been perpetuated by WallStreetBets or the communities that it's being attributed to. Also, this is a commodity, not a simple stock. For me, the chart remains bullish and it should do well if the dollar continues to drop. You can see that we had another nice pop over the weekend, so now we want to see the resistance at 29.857 flipped to support. The target of the bull flag has not changed, shown in pink. I think this could actually go much higher. Peter Brandt set his target around $100.
India Proposes Banning Bitcoin - Again
The move is bound to make potential and current crypto investors outside the country uneasy as well.
This is far from the first time that Bitcoin and cryptocurrencies have been "banned" in China, India, Russia, and other countries. India first outlawed BTC in 2018. This lasted for 2 years with a steep penalty of 10 years in jail and a full ban on all cryptocurrencies. The present bill is vague and uses the term “private cryptocurrencies,” leaving investors unsure if that includes digital currencies. The same proposed new regulation introduces a framework for an official digital currency to be issued by the Reserve Bank of India (RBI) - a CBDC by the sounds of it. According to research, “if the bill becomes law, India would become the only major Asian economy to ban private cryptocurrencies rather than regulating them like corporate stocks.” Ultimately, actions and sanctions against innovative money designed to protect the people is the exact reason why Bitcoin exists in the first place. The problem is corrupt and oppressive authoritarian monetary practices that create inequality.
The Short Squeeze Playbook
For those who believe that the $GME short squeeze was only dumb luck or retail fomo, read the link above. Posted over 4 months ago, a well-detailed report circulated WallStreetBets listing all of the reasons why $GME was the perfect stock to trade to stick it to Wall Street. The post’s prediction was pretty spot on: “The weeklies have the highest delta, so Citadel will be forced to hedge the most by buying shares. In other words, we’ll get the biggest bang for our buck in squeezing these. There is a chance Citadel/MMs switches to buying puts to delta hedge. Like I said, they’re asleep at the wheel for a second, retail will likely ram before they change their algos. However, once the squeeze takes off, not even Citadel will be able to stop it. In any case, if they do start to buy puts, we can sell the puts as a bonus.” The little guy is proving that money and knowledge are power, and that these are not solely possessed by Hedge Funds anymore.
Elon Musk Talks Bitcoin
"I am late to the party but I am a supporter of Bitcoin." - Elon Musk
Elon Musk clarified his stance in Bitcoin in a conversation on Clubhouse last night. “I think bitcoin is really on the verge of getting broad acceptance by conventional finance people,” he said.
He also spoke briefly about his meme affair with DOGE.
“Occasionally I make jokes about dogecoin but they are really just meant to be jokes,” Musk said Sunday. “Dogecoin was made as a joke to make fun of cryptocurrencies.”
“But fate loves irony,” he added jokingly. “The most entertaining outcome and the most ironic outcome would be that dogecoin becomes the currency of Earth in the future.”
It is clear that Musk is interested in Bitcoin and believes in the use case and importance. That said, I think it is a bit irresponsible to conjecture on Tesla or SpaceX adding Bitcoin to their balance sheets a this time. There's no evidence that will happen, so I would not make any grand assumptions.
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor.