The Wolf Den #54 - Shaky Corn, Satoshi's Ghost, The Pareto Principle, More
Bitcoin
I have once again written up an entire newsletter, only to see Bitcoin move. The good news is that I waited to analyze Bitcoin until the end. As I mentioned above, the past few days had my bias switch remarkably. I know that I was quite bullish on Tuesday, but things can change rather quickly. The clear rejection around 10K with a few other factors had me looking lower - some of those areas were just tapped. I am not trading this for now because I can see cases for both up or down, but let's take a quick look at the chart.
MONTHLY CHART
10 more days, so not much to see for now. Just note that $9,243 is presently resistance once again. That's not ideal, we would like to see this candle close above. If the candle closes below, I will once again watch $7,777.
WEEKLY CHART
Too early to tell, but if the candle closed like this it would be bearish. Decreasing volume, clear rejection for the third time at that supply level, a breakdown below the red resistance which we thought was broken, tweezer tops with the last candle. Lots of negative confluence, but also lots of time left. If $10,070 was the top, then we can expect quite a bit more retracement. This is healthy, totally fine. But a 61.8% retracement would take price down to $6,200 or so, so please be aware that something like that is possible. Right now I would watch the fibs.
Before we worry about that, there are plenty of other levels to watch. First, the 50 MA (blue line) and the area of the pink line. The 28.2% fib is around $7,700... You know I love $7,777 and have bids there still.
DAILY CHART
The red arrow was a bearish SFP and should have been a clearer signal to me that price had at least temporarily topped out. I am still looking for the same move I have discussed for ages now - a move back down to the blue zone to test that area for a bullish breaker. Looks more likely it could still happen than it did a few days ago. Notably, there's a golden cross between the 50 and 200 MA, but this is largely a lagging indicator. I would not be surprised to see price drop down and test those MAs at some point. Bulls want to see the daily candle above the pink line. That would be a nice support test.
6-HOUR LINE CHART
The bull div was great. The bear div that I was not watching was not.
4-HOUR CHART
The 50 MA failed since Thursday - we were watching that line closely, if you recall. Not only is there a macro bearish SFP, which I showed on the daily chart, there is a local one (red X) in this trading range. Price is trying to find support here at the channel bottom when this candle closes in a few minutes. That would be a nice sign for bulls. We want to see this channel hold. A close below, and I would like to the 200 MA below for support. If it holds for a few candles, we can look for a move back to the top. Fingers crossed.
HOURLY CHART
This shows the bigger trading range in play. The previous hourly chart broke the EQ (mid line), with the following candle finding support there (for now). This is worth watching if you are looking at lower time frames.
Trading Support And Resistance
This is a really great "masterclass" on Support and Resistance from a trader that I have been following for a while on Twitter, EmperorBTC. I could not write it better myself - you should bookmark this and study it, as it's the most simple and reliable method for finding trades that you can hope to master.
Altcoins
I cannot recommend trading alts while Bitcoin is moving like this. We have had some AMAZING opportunities of late for profit, but now it looks like wait and see. TFUEL did a 200% gain on the setup that I showed for a subscriber. I did NOT expect that kind of move, but cool to see a chart play out that way, and quite a few of you have reached out telling me that you caught it. I did not, but I am thrilled that you all made so much money on that chart.
BAND, FTM, NANO and XTZ were all charts that I posted Tuesday that resulted in sizable moves, after having some great ones last week as well. I am presently watching a few, but will not post setups today. If they start to look good after Bitcoin settles, I will share some charts tomorrow or over the weekend.
The large caps are yet to move on those bull divs, and some are showing potential hidden bear divs. I am still in them, in profit, but am moving stops up to break even.
Institutional Money Is Here
Wow. That's a lot of Bitcoin. Grayscale Investments bought up to 33% of all newly minted bitcoin over the last three months, as the asset manager continues to stockpile major cryptocurrencies. In value terms, the portfolio has soared to $3.37 billion from $2.77 billion. You may recall that it was recently reported that Grayscale has bought 50% of Ethereum mined this year.
Their products are focused solely on institutional investors. This is incredible bullish for the space - they are buying because there is demand. It's no wonder that GBTC has become such an incredibly popular product.
The Wolf Of All Streets Podcast Ft. Christopher Inks
I interviewed my mentor, which amounted to a chat about trading between old friends. Christopher Inks, Professional Trader and Founder of TexasWest Capital and I discuss humble beginnings in trading, making every rookie mistake in the book, working against the whales, "putting the work in", early explosive hot altcoin picks, calling the cryptocurrency top in 2017, why teaching and TA still work when everyone is doing it, human fallibility and the desire to be correct, Elon Musk, The General Rule of investing, common criticisms and misconceptions of trading, diving in face first blindly, the YouTube Purge, beating an unbeatable market and more.
Doom Everywhere = Markets Up
Traders are trying to figure out how the economy will be reshaped by Covid-19.
This article largely sums up my thoughts on the market. "What could possibly be keeping investors from losing their cool? For one thing, Wall Street loves a good acronym, and one that’s popular these days is the old standby TINA—short for “there is no alternative” to stocks. TINA’s back in town with interest rates on ultra-safe Treasuries dancing closer to 0% than they’ve ever been. In theory, that can make some investors willing to pay higher valuations for stocks. Even if the likely returns at today’s prices—and with today’s risks—look low, in the eyes of many investors they still beat almost-zero. That’s especially true for pension and fund managers, who have to hunt for return somewhere.
Another obvious explanation is what Bloomberg Opinion’s Noah Smith dubbed “the Golden Put,” a reference to a type of options contract that protects investors against losses. The provider of this put is the Federal Reserve, Congress, and President Trump, who, the thinking goes, will do whatever it takes to continue to mitigate the economic damage and, in doing so, keep the equity market afloat."
The Pareto Principle
The Pareto principle (also known as the 80-20 rule, the law of the vital few and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.
The original observation was in connection with income and wealth. Pareto noticed that 80% of Italy’s wealth was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied.
As a trader, it is likely that 20% of your trades will result in 80% of your profits - so focus on riding winners and cutting losers. Learn to implement a proper position sizing methodology to your trading, ensuring that you can withstand a string of consecutive losses without going bust.
Traders tend to fail to cut losers and then impatiently take profits too soon. It doesn’t matter if you have multiple losing trades over the past several months as long as your overall risk on each trade is less than 2%. The Pareto Principle will even out your results in due time, assuming you have developed a known expectancy on your system and employ risk management (position sizing).
Ride the winners and cut the losers and never be discouraged that more often than not, your trades will be losers or will be a wash (smaller winner or small loser). It’s the small minority of trades that will make you a consistent winner at the end of the year and over the course of a lifetime. Trend trading is boring and will probably give you a home run every one in ten trades with a couple doubles and triples in between. Be patient, you will be rewarded.
Chart Requests
ALGO/BTC
Above 2279 is good. Below 1982 is bad. Simple, right? Price has once again broke through descending resistance without much volume or fanfare. Really not sure what to think about this con at the moment. It "should" go up based on those resistance breaks, but does not seem to want to at the moment. In theory, this chart is bullish. A break of 2279 and flip to support would add some confidence.
BAT/USDT
This has been rising with Bitcoin while the BTC pair has been sideways. really not that exciting. That said price is basically in a massive descending channel and has been since this pair topped. At present, it is trading comfortably in the top half of the channel and is currently testing a key level of support and resistance at .2039. Holding that level should send price to the upper black line and top of the channel. This ALL depends on BTC movement. The rise of this coin on the USDT pair does not look particularly sustainable - hard to drop good lines because the reversal has been steep with wicks, but it appears to be an ascending wedge.
BEAM/BTC
This looks pretty good. I like the break of descending resistance and the clear move away with decent volume on some of the candles. A bounce off of the bottom of the channel has a good risk reward - not saying it would be successful, but it's easy to take a small loss if it breaks down. Otherwise, the "safer" entry is a break of 366. Even safer is a retest of 366 as support after the break, but that retest often does not come. If this holds the ascending channel, it's a stairway up.
ENJ/BTC
This chart continues to look beautiful, but that does not mean there's a position to be taken here. I have posted this one over and over, and it keeps working it's way up the levels. At present, it has already made another move so I don't see an entry. It bounced beautifully from that box. 2077 is the next major barrier, so a break above that would be bullish. The issue is... that would likely print a sizable bearish divergence with RSI, which would have me very wary. Nothing there yet, but it seems likely if price actually goes a bit higher, since wicks technically do not count.
IOTA/BTC
Strange chart. 2099 is clearly a major resistance that needs to be flipped. I definitely would not consider a trade anywhere below that. Also, the daily 50 MA has rejected every attempt at a move up. Flipping that blue line would give a bit more confidence. If those things happen, the next resistance at 2377 is a reasonable target. Nothing to see here for the moment, but could change fast with a little volume and upward momentum.
JETS ETF
The very mention of "jets" or "airlines" is enough to put you in a mild panic right now. Predictably, this has bounced far less than the rest of the market, as it focuses on one of the hardest hit sectors in the economy. Price is presently ranging from the bottom to the top of the reactionary bounce. The descending black line shows the resistance that started after that bounce - a break of this would be a signal that some upside is expected. That said, the 50 MA is offering strong resistance at the moment (blue line). I would not consider this below those two lines. If they break, a trip to the range high would be reasonable. A break of the range high should send this back up towards the 200 MA and higher targets, but I hesitate to even draw them for now. We can revisit this if it gets to that range high.
KNC/BTC
This looks decent. It "broke out" through descending resistance, but on no volume. And that line is not convincing, because of the wicks and structure. Either way, it seems to be moving up once again from the pink support area. Anything above that remains more bullish than bearish. The 50 MA is just ahead, should offer some resistance. A break and it should target the mid 7400s or so. Hard to predict much beyond that. In theory this should return to the top of that black descending line.
LTC/BTC
Almost a week later and the bull div has done very little. As I said, a daily bull div can be frustrating and take a long time. Also, we have potential hidden bearish divergence showing, which is not confirmed. I really want to see this above the red line first, through the descending black line ideally. I am already in on the bull div, so nothing has changed for me. If this does break the descending line, we can expect quite a bit of movement to the upside. For now, just play the local levels and don't get carried away.
OGN/BTC
This looks decent. Clear break of the descending black resistance, and the candle that broke it had increased volume. It looks like that move took some wind out of the sails, which is expected - that's why we often see retests as support. Price is currently in a local trading range. Anything above the equilibrium (EQ, dashed middle line) is good. That is around 1846. Looking at the pivots, price is currently finding support on the daily S1. 3061 is the target of this holds - the next pivot above. This would all be confirmed by a break of the trading range to the upside.
OST/BTC
This looks good at the moment. Price is attempting to breakout through the descending resistance that is the top of a steep descending wedge. There was clear bullish divergence with RSI in oversold territory that started this move. We need to watch out for potential hidden bearish divergence now. That red box across the chart is the main story. Any position now would be targeting that - if I was trading this, I would personally exit if it made it there, and reenter a bit higher if it flips. Anything below that is technically bearish, so a move up to it is a bounce. Nothing wrong with that, just need to be aware of it.
PYPL (PAYPAL)
This is in price discovery for new highs, so it's hard to chart it or guess where the top will come in. At the moment, holding above the local red line is bullish. It is in an ascending wedge, but a break down would only target the bottom of the wedge - not really a big deal even if it happens. EMAs are all pushing up. Very little bearish here, but again, chart is somewhat useless. This is purely on fundamentals.
RCL (ROYAL CARIBBEAN CRUISES)
Every part of my being wants to short cruise lines still, even though they are starting to see booking increases for next year. If there is a second wave of virus, these are going to sink like the Titanic. Price is currently trading back below the 23.6% fib level, which is not a big deal. But there hasn't been a huge retracement of the move down, even with all of this bounce. From a chart perspective (I would not trade this on a chart, honestly) it has a lot more room to go up and still be in a downtrend. Even up to the 61.8% fib or higher. Also, the pattern is unclear here. It's "almost" a bullish ascending triangle, but the top is not flat enough for my liking. That makes it an uglier bear pennant instead. Basically, this chart isn't telling us much. Really up to Covid to decide the fate of RCL.
REP/BTC
This is a really tough read, honestly. I am tempted to move that descending line to connect with the recent high, but left it where I had it since it is being retested from the bottom once again. There was a recent death cross between the 50 and 200 MAs, with the 50 being tested as resistance here as well. I would feel more bullish about this if it saw real volume now moving up above the MAs and that black line. Otherwise, it's sort of drifting sideways on decreasing volume. Watch for a volume increase.
RVN/BTC
We recently traded a scalp on RVN up to the blue zone, which is the major resistance. RVN is crap below that zone, even with nice opportunities. From a macro perspective, that was a major support break. You asked specifically about the bull div - I have drawn it, but would not trade on it. It's over a really long period with a ton of nondivergent price action in between. Some would count it, I doh't see it as a big deal. Right now I see nothing but resistance above and a search for support. Above 207 could be the start of some bullishness. Zooming out, this chart is just awful.
SNT/BTC
This chart is a bit brutal, looks like a big pump and dump in the past 2 weeks. You really want to see the weekly close above 280, which is the key support that was finally broken. Right now price is below, but there is a lot of time left in the week. The ascending channel is important as well, you want to see that hold. There has been a nice increase in volume, so that is worth paying attention to. Bottom line - below the ascending channel on the weekly is bad, above 280 is encouraging.
TDOC (TELADOC)
Let's be honest - the chart is meaningless. This has risen like a rocket because of fundamentals and the COVID crisis. The question is - if people go back to work, will they still use the service or will it see a decline? I believe that telemedicine will continue to thrive, but not at the levels that it has - which would mean a bit of a reversion to the mean for stocks like this.
Looking at the chart, I assumed I would see all bullishness since it has gone straight up. That said, there was an ascending wedge which has broken down and been retested as resistance. These are not that reliable in situations like this, but that's what's on the chart. The daily 50 MA is just below, which you would want to see hold as support. $176.40 is a key level as well.
Follow the fundamentals on something like this.
TLRD
Hard to like this much at the moment. It's encouraging that the immediate resistance is being broken and tested as support. That could signal some bullishness. But it's still in a downtrend and below almost all relevant resistance. I would not long this without seeing that black line broken and the 50 MA, which is screaming down, flipped to support.
XDB/USDT
This looks decent. Nice 78.6% retracement and presently in a descending wedge. I would like to see a break of the upper descending line and a flip of 1619 back to support.
ZEN/USD
50 MA is not being kind to ZEN on this pair. Bulls want to slip that blue line to support. Price is trading in the top half of the range here, which is more bullish than bearish. I just see this is super sideways, no reason to even consider trading it in this area.
ZRX/BTC
Interesting spot here. Had a big move up on serious volume, but dropped hard and the volume disappeared. Hard to tell if the move is over or if this is consolidation. It is currently sitting on a key level of support - will be interested to see if this holds. All EMAs are pointing up and crossing bullish, so there's reason to think this will head back up sooner than later.
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.