The Wolf Den #40 - Advice, Analysis, Shorts, Longs And So Much More!
Bitcoin Thoughts
I am still long Bitcoin on this round from $5,930. I do think that this move could be a bit exhausted and that this is a no trade zone for the moment. It could go either way and there are mixed signals. As I often say, there's no reason to force a trade when you have no conviction about the next move. Here are a few quick charts.
This channel is an idea based on the two touches at the top. Price tends to travel in channel, so this unconfirmed channel seems likely. There is no second touch on the bottom yet, but that would make sense. As I said before, this has retrace the previous drop nearly 80%, far too much to be considered a bear flag. So this is just an ascending channel, which could be the path to a full recovery. Fingers crossed.
As discussed Tuesday, TD Sequential did confirm a sell 9 on the daily chart, which is a sign to short. This is slightly worrisome, which is why I am cautious here about continuation. These are hit and miss, but when they hit they usually lead to a sizable move the other way. I would love to see this invalidated and see a new count begin.
The 4 Hour Chart seems to show price bouncing off of the ascending red support for now. Bulls want to see that line hold. The black line also seems important locally, as the previous swing high.
This is the chart that is keeping me in my long. There's hidden bullish divergence on multiple time frames with RSI. This is a signal of likely continuation up.
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Bloomberg Model States 100% Chance Of Recession
Surge in Unemployment Claims Leaves No Doubt U.S. in Recession
Wow. Bloomberg's model has reached the top - a 100% chance that the economy will enter a recession in the next 12 months.
In other news, WATER IS WET.
First, many people do not understand what a recession really is - it is not determined in any manner by the stock market. Let's define recession: a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.
And what is GDP? The Gross Domestic Product measures the value of economic activity within a country. Strictly defined, GDP is the sum of the market values, or prices, of all final goods and services produced in an economy during a period of time. GDP is a number that expresses the worth of the output of a country in local currency.
With predictions that GDP will drop further in a quarter than it did in the entire Great Depression, it's obvious that we will enter recession - some, like myself, have been arguing that we are already there.
Still, I have never seen a financial institution so brazenly make a prediction on the future of the economy. It is worth noting.
Altcoin Trades
ETC/BTC
Throwback! I took an oversized position (2% risk) on this, love the setup. Perfect descending channel about to break, sitting on key support, bullish divergence with RSI on the daily and golden pocket retrace of entire last move up. Checks every box for me.
ICX/BTC
Bullish. Price has consolidated after a move up, bounced out of a local demand zone and broken out of the descending wedge. Immediate target is the top of this wedge at around 4264. Then the top of the blue pattern if it continues up. I have shared this a few times.
LINK/BTC
I can't see trying to find an entry now, but did post this when it was sitting on support last Thursday. What a move! Now it looks like fomo, I would either look for an exhausted short at some point or a retrace to enter long.
MATIC/BTC
Another trade that I have been sharing and have been in. I exited a portion here for a great profit. There is some potential bearish divergence on lower time frames, so I am watching for a retrace. I would love a retest of the ascending black support again, as that has been an easy trade every time it touches. For now, it came up 1 sat short of the first target at the 23.6% fib level.
PERL/BTC
I have been day trading this the past few days, has been fun! It is forming a descending wedge now locally, which should break up and target at least the top of the pattern. I also expect a potential move to the top of the trading range again. Let's hope that this one isn't done!
Again, no position to take right here - we need a break of that top pink line.
WRX/BTC
This rose about 15% within hours of me sharing the trade with you guys on Tuesday. Now it looks like it is consolidating for another move up in small bull flag (could be a descending broadening wedge). A break of the top of this little bull flag would be a solid entry - even better on a retest. I am still theoretically targeting the all time high, with stops in between. That's ambitious, I will continue to scale out as I already have.
XTZ/BTC
FINALLY! I set my orders for this when it broke the all-time high in February. I waited. They finally filled in March. Then I was underwater. Now it's booming. Patience pays off.
Price is currently at resistance, so I anticipate consolidation here. A break of this channel should send this absolutely to the moon, so this is a key area to watch. No trade at the moment, looking for that break.
Bitcoin Less Risky And Volatile Than Other Assets?
When viewed through the proper lens, the value of Bitcoin has been far less volatile than that of legacy assets like stocks and real estate. I could offer a quick summary, but I suggest you click on this thread and read his thoughts - it's very easy to understand and very interesting.
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What Social Distancing Looked Like in 1666
This article has nothing to do with trading, investing or the normal newsletter content - I just think it's a very cool look at what the world did to mitigate the effects of the Bubonic Plague. Very interesting in context of the COVID-19 pandemic. They largely took the same approach a few centuries ago.
Pro Tip - Following Your Gut (Don't!)
In life, we often hear about trusting our gut instinct. That can be good advice, as our first instinct in a situation is often our best.
This is not true in trading. The trick is not to learn to trust your "gut" feelings, but, rather to discipline yourself to ignore them. Gut feelings are emotional and emotion is a trader's enemy.
As Mark Yusko said on the podcast last week, “human beings do two things really, really well - we buy what we wish we would have bought and sell what we are about to need.”
Most traders have a "gut" that tells them to do precisely the opposite of what they should actually be doing.
Plan your trades - set a stop loss and take profit order so that your gut has no say in the matter.
Chart Requests
AAPL (APPLE)
Daily on the left, weekly on the right. You can see that price is struggling with a key level of resistance at $271. Daily closes above that line would start to make this look truly bullish, as opposed to bouncing in likely relief. Apple is one of the strongest companies in the world, regardless of this downturn. So dips on this are probably for buying with a very long term focus. I personally think rejection here would lead to more downside.
The weekly looks a bit better, with a bounce out of the blue support area and break of descending resistance. It is also above both the 50 and 200 Weekly MAs, which is not the case for most stocks.
AC (AIR CANADA)
Above 20.25 = good. Below 15.09 = bad! It's now attempting to break above 20.25. Still, lots of overhead resistance in the form of MAs, fib levels and horizontal resistance. Still hard to tell if this is a reactionary bounce or a true reversal - I can't see anyone getting on a plane anytime soon! If you are long, 25.83 looks like a good target - the 28.3 FIB and 200 Weekly MA.
ADP (AMERICAN DATA PROCESSING)
Blue line is more of an area than a line. Price is currently at the 50% retracement level of the entire move down. Could be strong resistance. Death cross of 50 and 200 MA, but lagging indicator. Doesn't mean much. Both MAs still pointing down, so they should act as resistance. Above the area of that blue line would be more convincing at this point.
AEP (AMERICAN ELECTRIC POWER)
Looks like basically every other chart. It is at a key resistance here, the highs from 2 days at the end of March. Above that and a retest as support would be a decent entry if your bias is long. Big descending broadening wedge, but really hard to play that pattern here. Death cross of 50 and 200 MA finally happened yesterday, for what it's worth. I don't see an immediate trade here.
APA
Perfect double bottom, hit it's target in 2 days. Very cool. The target is determined by the depth from the low to the neckline. Price broke the neckline yesterday and gapped up to the target today.
That said, it's worth watching today's volume. For now, volume has been noticeable decreasing on the price rise. That means it could be more of consolidation before heading down then a true uptrend.
All depends on OPEC, to be honest.
BRK.B (BERKSHIRE CLASS B SHARES)
Has moved well, but technically this is a textbook short. I actually took this short today when watching the chart. Price is heading into a major resistance, a support that held multiple times through 2019. There is also potential hidden bearish divergence with RSI, not yet confirmed. A flip of the black line would be bullish.
BVN (COMPANIA DE MINAS BUENAVENTURA)
Classic breakdown of a bearish ascending wedge and retest of the bottom line as resistance. For now this looks like a spot to short. Bias would flip more bearish with a break of the pivot (P) at $8.03 or so. For now, this is ranging between the 2 blue lines and breaking down a bearish pattern.
CLX (CLOROX)
I had an amazing Clorox trade a couple of weeks ago but exited quickly. My thinking on a fundamental level now is that demand will slowly decrease as the world returns to normal (if that happens). Also, seeing the sign of a potential head and shoulders on the 4 hour, although that is something to watch, not trade on. It's irrelevant unless it breaks below the black ascending line. In general VPVR on both time frames shows the volume nodes as support and not resistance, and price is still trading well above the trading range that it was in for ages. TA looks more bullish than bearish, just keep the state of global affairs in mind when trading something that rose tremendously because of a pandemic.
COTI/BTC
This one is a tough read here. It is sitting near a key support level, which technically could make for a good entry with a tight stop, but looks like it wants to break down. That said, price broke ascending support, so it could signal some more downside. Not a trade I would personally be looking to take here in either direction until we see some clarity.
CMCSA (COMCAST)
The 200 Weekly MA is looming directly above as resistance. Hard to want to take a long position into that area. For now, this is floating between key levels. Nice reversal, but not convincing, like everything else. When the economy does recover, Comcast should fundamentally be a good buy.
FTM/BTC
This appears to be breaking out of a significant downtrend that sent price to an all time low. We want to see volume and a strong move through resistance. An entry here, or on a retest (if it happens) of this descending line would be very bullish.
GDXJ (VANECK VECTORS/JR GOLD MINERS ETF)
Yet another tough one. Strong reversal, coming into resistance. Nice move above the S1 pivot here, should theoretically target P. $35.98 should be strong resistance, so it's a no trade zone for me.
MGM (MGM RESORTS)
Textbook scalp short here from a technical perspective. Bit bounce from one key level, running into a key area of resistance. Notice that the 50 and 200 MAs had a death cross, then almost a golden cross - that golden cross here failed, with the 50 MA now pointing down again.
Flipping the blue level with a close above and retest would flip bias.
Deciding to trade this is really a bet on hotels and entertainment - not the chart.
MTN (VAIL RESORTS)
Like every other chart. Nice big bounce, at resistance with decreasing volume. That's a sign that this was consolidation before another move down. Presently finding resistance at the 23.6% fib level. I don't see this making it beyond the blue line, but who knows! Are people going skiing!?
NRG/BTC
This is clearly in an uptrend, as can be seen by the ascending channel. Price is currently holding the top half of that channel, which is bullish. Anything above the EQ (dashed line in the middle) is considered bullish. A drop below that would likely target the bottom of the channel, which could line up with support at 2600. For now I would not anticipate that drop, but would look for a bounce off of the EQ and move to the top of the channel and targeting the next key level at 4100.
NVDA (NVIDIA)
This had a beautiful double bottom play out and exceed it's target, which I posted months ago. Presently has made a nice reversal from the local lows and is at descending resistance. A break of that descending black line would be a good sign of a true breakout to the upside. That is where I would personally look to buy at this point.
PENN (PENN NATIONAL GAMING)
This chart and company are absurd. Pumped when bought by Barstool Sports, dumped when the economy crashed and casinos were closed. Chart somewhat of a meme in that context. This company will do well if casinos open again, right? That said, you can see the key resistance levels on the chart. It's testing one now.
RLC/BTC
This is in a really interesting spot on the daily chart. 12 CANDLES have touched the resistance at 4898, without a single one managing to close above it. Price is currently trying to break the streak - a close above that level on the daily would be really bullish. For now, it's trending up generally as long as the ascending line holds. I could definitely see taking a position on this coin with a break of that line and close above. There is a lot of resistance over head, after a death cross between the 50 and 200 EMA. But I view that as a lagging indicator, more a result of the previous drop than a predictor of what is to come.
SHAK (SHAKE SHACK)
Shake Shack has great burgers. The stock is also trying to break out and confirm a double bottom, with the target shown. That target is in confluence with the next high volume node on VPVR. It needs to close this candle above the red line to confirm - then a retest as support would be a text book long.
SLV (ISHARES SILVER TRUST)
Price broke that blue support area but quickly recaptured it and flipped it back. Looks good anywhere above that box. Should see strong resistance at $15.25 and above with both MAs looming.
SPY
I shorted this today. Ascending wedge resistance tapped, in confluence with a major horizontal resistance. Decreasing volume almost every day since the bottom. 50% retrace, which is expected on any impulsive move down. This looks ready to roll over to me and I can let it go easily above the horizontal line if the idea is invalidated. Really looks like a weak recovery.
SPX
Please see SPY description above!
USOIL
I continue to share the monthly chart here, because it is the most interesting. I stopped out of my short on this on the wick up before it immediately dropped back down to start the week. Classic! Right now it is still struggling with resistance. I would love to long this on a touch of the bottom line of that channel and still see a huge bull div on the monthly. That would be my ideal scenario now.
VET/USDT
This pair is at a key point - it is sitting on resistance after breaking through. That said, the breakout had a major wick and almost looked to be rejected, so we want to see some real volume sending price away from this descending line. There's a clear level of resistance in the blue box that I have drawn across the chart. On VPVR, the POC (blue line) is way over head, as are all of the major volume nodes - so if this continues up, there is plenty of room to run before hitting resistance on this indicator.
The Block Experience Podcast
I basically talked about everything that is on my mind in this podcast - it's worth a listen, as I really enjoy being the interviewee more than the interviewer!
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.