The Wolf Den #18 - Tesla, Trade LESS Make MORE, BTC, Alt and Legacy Trades
Bitcoin Charts And Analysis
I bought more Bitcoin at $9,090, based on the key level we have been watching on the daily chart. I have some orders lower, but am still in the bulk of my positions from below. Let's dive into the charts - not much has changed, honestly.
MONTHLY CHART
Bullish monthly close, above resistance. Incredible monthly candle, engulfing the previous 2 candles, and following the hammer we discussed last month. Some would call this three candle pattern a morning star, although technically a morning star requires gaps down to the hammer and back up to the next candle. That said, gaps are nearly impossible on high time frames on a Bitcoin chart because the market never closes. No matter how you look at it, it was mega bullish. Now we will watch to see if February can close above $9,243 and hold support. Lots of time left.
WEEKLY CHART
Large time frames remain definitively bullish. Price made a clean break on nice volume from the channel that it's been traveling in since the 14K high. From this perspective, the downtrend is over. The "bearish" case here would be a drop to retest the top of the channel as support. That would be shorter term bearish, but would still be bullish overall, as something like this would still have price trading above the channel. A break of the red line at $10,540 would make the first true higher high and would signal the end of any bearish argument. That's what we are REALLY watching for.
DAILY CHART
Remember my "one line to rule them all?" Price just dropped down on the daily chart to test it as support. Totally normal and expected price movement for now. I would not be surprised to see a bit of price action below this line, but we generally want to see this hold to signal further movement up. I bought some Bitcoin here - at $9,090.
4 HOUR CHART
Price has currently broken local support (black line). This would indicate that a trip to the blue demand zone is likely. That said, RSI is in a bull flag and touching the bottom (could break down, depends on the next close) and price is currently working on a tweezer bottom. This time frame is muddled, nothing much of value here to hang out hats on.
Trade LESS, Make MORE
Trading is one area where less work can often mean more money. The statistics are clear - people who over trade make far less money than those who take better positions with more conviction and are patient. In fact, any trading is likely to lose you money vs. investing.
It’s better to miss a good trade than to take a bad one. Missing a good trade doesn’t deplete your capital - it only fails to add to it. A bad trade will not only reduce the size of your trading account, it will eat up emotional capital and your confidence. A losing trade is not a bad trade, it is one that doesn’t meet your requirements. Bad trades come from working hard to see something that’s not there, guided by your need to trade rather than the market offering a good opportunity. Being a "full time" trader does not mean you have to be trading full time. You take what the market gives and know when to sit on your hands and do nothing.
Statistically, passive investors win the race, like the slow-moving tortoise. Behavioral finance professors Terrance Odean and Brad Barber of the University of California Davis researched 66,400 investors between 1991 and 1997 and concluded that two things weighed down the active traders -- lousy stock picking and transaction costs.
In fact, active traders (averaging 258 percent turnover) earned 7 percent less annually than buy-and-hold investors (2 percent turnover), That's 11.4 percent for the gunslingers vs. 18.5 percent for the sideline-sitters.
In addition, the research showed that another group of investors who converted to online trading saw their returns drop from beating the market by two percent before going online to falling under the market by three percent once online.
Here's even better proof. Joe Ricketts, Ameritrade's founder once told Fortune magazine: "The best thing, really, for an investor to do is buy a good company and hold it... Trading often and heavy is not something that makes you a lot of money. That's contrary to my own interests, but it is the truth."
Focusing on larger time frame trades that fit every criteria of your system is more likely to make you money than aggressively entering and exiting positions. And to take that a step further - investing is almost ALWAYS better than trading.
Altcoin Trades
Alts have been amazing to trade - but please remember that if Bitcoin decides to make a major move, these setups are likely to fall apart. Always have your risk managed! $AION did a 2x on the setup I shared, by the way! I hope some of you were along for that ride.
Just a reminder of how I view alt trades. Large caps had their moment for the past few weeks - it's likely that the movement we are seeing in mid caps is the next part of this cycle.
AE/BTC
I shared this the other day on Twitter as price was breaking out. It has now retested and popped off of support with volume. I am targeting the top of the descending line with this trade.
BAT/BTC
I have posted this setup in a number of newsletters. I am in from the purple line, but the real trade is yet to come. A break of descending resistance would be the catalyst and price is working on it now. Keep an eye on this one! Target based on the depth of the descending wedge is shown. Here is the setup from last week (and I shared before that).
OAX/BTC
I shared this one last week as well, and it's quietly up over 10%. It has presently flipped the key area around 540 to support, which could still be a great entry if you can get it. Here was the setup from last week.
RVN/BTC
Finally appears to be making a move. I am interested with a clear close above 335 and a retest of that line as support.
XMR/BTC
Monero finally broke the downtrend and confirmed the double bottom shown on the right of the chart (target in purple for that pattern). I have been waiting for this one for a while. If alts continue to rise, then this is one of the better potential setups that I have seen. I have shared this a number of times in the past few newsletters.
XRP/BTC
I am NOT currently in this trade but wanted to share it since it looks very good. Price bounced from the blue support with clear bullish divergence with RSI. It broke the descending resistance and retested as support. It's moving away on nice volume. There's a LOT to like with this setup.
Technical Analysis Is Subjective
I posted the above Tweet yesterday expecting a mixed bag of responses, with every possible interpretation of the candle. I was not disappointed. In a vacuum, that candle is a clear shooting star (or gravestone) if it comes at the top of a trend, or an inverted hammer if it falls at the bottom of a trend. Same candle, totally different meaning. My mentor Chris (https://www.patreon.com/TXWestCapital) rang in with my exact thoughts on the candle.
As Chris said, I view that candle as neutral, because it comes neither at the clear top of an uptrend or clear bottom of a downtrend. Context is essential in technical analysis. The placement of the exact same candle utterly alters it's meaning.
Regardless, the tweet did it's job - to offer proof that technical analysis is not a science - it is completely subjective! Use it as a risk management tool within your own trading system. Do not expect technical analysis to tell you what will happen in the future.
Legacy Markets
AMAZON (AMZN)
Strong jump on earnings. Looks ready to break above it's all time high and go into price discovery. This looks really primed to rip.
DISNEY (DIS)
I shared on Twitter yesterday that I was buying Disney at $140 and, as expected, price is already rising. I am not buying this because of a chart. I have a long term position that I have added to, with the expectation that the earnings call tonight will be positive. Disney+ should do very well and I am hoping that it will beat expectations. Watching for a 5% jump if my assumption is correct. The major risk is Shanghai Disney and coronavirus. This is my favorite stock at the moment.
GENERAL ELECTRIC (GE)
I was fortunate enough to exit my GE position years ago before the massive drop. That said, Price seems to have bottomed and the news is more positive on General Electric. I took a stab at a position yesterday at the key black line , $12.24. I would not be surprised to see a further drop to either of the black lines drawn, but wanted to start a position here in case it's flipping to support.
ROKU
I am not in the trade yet. I have an alarm set for the top line of the descending wedge and intend to enter a position if it breaks out and preferably retests. The target would be around $170. A close above the EQ (equilibrium, center dashed line) of the blue range today would be bullish.
UBER
I shorted UBER for a long time for quite a bit of profit. but it looks like it has turned around. I did not catch the bottom - nowhere near it. I am long from $36.08, targeting the grey gap up above. I am still fundamentally bearish on UBER in the long term, as I do not think it is a viable business model. If they get self-driving cars and don't have to pay drivers, then we can talk! For now, I view it as an overvalued app.
XAU (GOLD)
I shared this chart on January 20th - just a reminder that my idea has not changed. Price has dropped a bit since. My targets to buy are the boxes shown, if it gets there. You can push play on the chart to advance it.
Bitcoin Makes All Other Money Obsolete?
I was shocked when I saw this article tweeted by Fidelity and decided to bite on the clear click bait. If you are looking for the most aggressively maximalist argument for Bitcoin, you will find it in this article! Regardless of whether you agree or not, there are some great points and it is worth a few minutes of your time to give it a read. Fidelity is a highly respected company for legacy market investors, so it should not be taken for granted that they chose to share this on Twitter.
Iran Using Crypto To Beat US Sanctions
Iran is using Bitcoin to offset the damage of US Sanctions. As we see nations continue to ramp up their exposure to cryptocurrency, we should see an increase in price and value. Exposure to Bitcoin for a country is a viable strategy for fighting the power and weaponization of fiat.
That's the positive side for Bitcoin. The negative case is laid out simply by Alex Krüger in the following tweet.
As countries use Bitcoin to circumvent sanctions, we can expect to see the US further legislate against the use of Bitcoin. For now it's still the wild west - further regulation would likely have a negative effect on crypto. While nobody can "ban Bitcoin," they can certainly make it nearly impossible and even illegal to convert it to dollars.
Overexposure To Alts
The results of this poll are absurd. Nearly 40% the respondents said that they have 76% -100% of their money in altcoins. This is horrendous risk management and amounts to nothing more than gambling. There's a chance these people will make money, but it will only happen if they get lucky.
I retweeted the poll and received countless angry responses from various alt coin maximalists. It really reinforced how immature this market is, and how much it's participants are largely gamblers.
Some of these people will make a ton of money and use that success as an "I told you so" opportunity. I wrote an article about this phenomenon - random reinforcement. You can read it here.
Bottom line - never be overexposed to altcoins or any other risky asset. The odds are strongly against your success.
Let's Talk About Tesla
As you all know by now, I have been a huge Tesla bull and reloaded my position heavily around $185, the beginning of this parabolic run. You should also know that I sold most of the position in the 500s and am still selling.
What is happening with Tesla is reminiscent of the Bitcoin bubble at the end of 2017. At the time, people were screaming that Bitcoin was a "new paradigm" was going to be the "only money," and was "going to 100K." I was buying Tesla because Wall Street said it was "going to 0." It's the irrational flip side of the same coin. Now Tesla bulls are calling for $7,000 a share, saying that Tesla is not a car company, that it's going to change the world etc. People NEVER learn.
I would love nothing more than to see Tesla reach $7,000. But this story ends the same way almost every single time.
Mike Novogratz posted that chart yesterday - before Tesla went up ANOTHER 20%. The parabolic rise of Tesla is now greater than Bitcoin's in 2017. It's insane.
So why is Tesla rising at such a tremendous rate? FOMO and a short squeeze. It is still the most shorted stock on Wall Street, which is guaranteed fuel for big players that want to make a ton of money taking advantage of those orders.
Bottom line - keep a calm head and be rational when viewing the market.
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.