The Wolf Den #95 - How To Manage A Trade And More
Bitcoin Thoughts And Analysis
I have been long Bitcoin on Phemex for 10 days and have added to my position on the way up. My current cost basis is $9,971. I have moved my stops up below the key support at $10,540, which is the main area that I have been discussing. I want to see that hold and am prepared for a drop to there with a wick below. I have shared this position a few times.
Bottom line for me at the moment is that above $10,540 is bullish, and below is more bearish and could lead to a bit more downside.
Macro very bullish.
MONTHLY CHART
The monthly candle is presently back up the key level at $10,540, but there's a whole lot of month left! Not much to see here, key levels are marked and little has changed for the moment.
WEEKLY CHART
Last week confirmed the potential tweezer bottoms that I discussed, which is a reversal pattern. We have seen nice follow through so far on the present weekly candle, but we have 5 days left to see where it closes. Not much to see on this time frame for the moment.
DAILY CHART
This played out exactly as predicted this time. The bottom of the range held, with a few wicks below to find liquidity Price has now exited the range and tested it as support. We "should" see price continue up, but technical analysis cannot tell us what will happen. The idea is right. I would like to see today's candle close higher, not lower. A much lower close could give a shooting star and be a sign of more downside to come. We want to avoid a large wick on top.
4 HOUR CHART
Zooming in a bit, we had a clear breakout from the blue line and retest as support. I shared all of this in advance of it happening and after. We now seem to have an ascending channel. You can use the bottom of that as a key support. We don't want to see price break down from this channel.
Altcoins
The altcoin market looks brutal at the moment, so I cannot share any trade ideas. Many are breaking key supports, so it's hard to feel confident. Also, Bitcoin Dominance is rising fast. For now, I will sit on the sidelines and wait for better entries. I took quick trades on SXP and BZRX yesterday that both quickly stopped out. SXP was particularly disappointing, as it looked poised for a strong breakout. I immediately exited when it fell back into the red wedge that I had shared. I am also in XTZ but very close to hitting my stop loss.
It happens! The only thing I am watching is BNB, because it is getting used heavily for Burger Swap, much like ETH was with Uniswap.
BNB/BTC
As mentioned, this is the only alt trade I am considering, but I have not entered and likely will sit it out. That said, there is quite a bit of excitement around Burger Swap as a replacement for Uniswap. This required BNB and has fueled quite a bit of buying. As you can see, we are seeing a first retest of a very key level on the chart right now as support, which is what makes this interesting. If I did enter, I would not ride this very far below that blue zone. Up to you, but the alt market looks bad for the moment.
Legacy Markets
The dollar continues to look weak, sparking a rise in effectively every other asset. As I have mentioned before, the government desires a weaker dollar to prop up the stock market and compete on a global scale. This race to the bottom of fiat currencies will likely end in significant inflation.
It's important to note that the seeming rise in the stock market and other assets is a bit of a false flag. What's more likely is that they are staying effectively sideways in value while the dollar drops. Your assets are not rising in price! Your buying power is actually just diminishing as your currency loses value.
Scary and unsustainable.
As for some trades I have posted - NIO and WKHS have both been really great, while DOYU and SMED have both failed their setups. That said, I am still in both because my stops never fired and they are both rising once again. United Airlines is trading even but still looks promising.
DXY (DOLLAR INDEX)
The DXY monthly chart remains a marvel. This candle is not closed, so there is nothing definitive to analyze. That said, as I have predicted now for months, the channel broke down and has retested support as resistance basically to the "penny." Remarkable stuff and coincided perfectly with the Bitcoin dip and subsequent rise
As you can see, Bitcoin and the DXY continue to move opposite one another. If the dollar is really heading way down as the chart would indicate, much higher prices are likely for Bitcoin.
Trade Management Case Study - BZRX
I wanted to use a trade setup that I posted last Tuesday as an example of how I manage a trade. One of the hardest skills to master as a trader is what to do after you have entered. The simple answer for most people is to do nothing - let the trade play out to your plan. However, once a trade is in profit I have a very hard time accepting it turning into a loss. As I mention over and over again, once a trade is in decent profit, I move my stops to at least my entry. Once that trade breaks a key level (a target where I take profit), I move my stops up below that support.
That is what happened with this trade. You can see that the pink lines are targets - ultimately you hope to see price reach the top of the pattern, which should still happen. That said, with the market looking shaky, it's hard to rely on longer term trades.
I entered this on the breakout and retest, as discussed. My cost basis was around 5000. I immediately set my take profit orders and stop losses using OCO orders on Binance. I sold half of the position at the first pink line, 6232. I had orders to sell 10-15% more at each of the levels above, if it reached there. However, once 6232 was broken and price started to rise above, I moved my stops up to below the pink line - right below 5700 where I saw a new local support form. I always set my stops a bit below support.
Price rose again and I moved my stops up again to trail price. On the large candle, I set my stops at 6620, just below the most recent local resistance.
I stopped out on the rest of the position for a great gain on the drop.
This is advanced stuff, but I wanted to share. The main idea is to make sure that you lock in a gain once you have it. As you can see, BZRX is presently making new lows. I would have stopped out for a loss if not for emplying my strategy of trailing stops.
Stagflation 101
By Sahil Bloom:
The term "stagflation" is used frequently in discussions of monetary policy in the post-COVID world. But what is stagflation and how does it work? Here's Stagflation 101!
First, a few definitions. The "stag" refers to economic stagnation - low growth and high unemployment. The "flation" refers to inflation. Putting it together, "stagflation" is an economic condition defined by the presence of low growth, high unemployment, and inflation.
For much of history, stagflation was believed to be impossible. Widely-accepted economic theory suggested there was an inverse relationship between inflation and unemployment (the "Phillips Curve"). But this all changed in the 1970s.
Triggered by the oil crisis of 1973, when an OPEC oil embargo sent oil prices skyrocketing, the US experienced a recession with rising prices. In the US, inflation doubled in 1973 and hit 11% in 1974. GDP fell for 5 consecutive quarters and unemployment hit 9% in 1975.
This is a big problem. Why? Prices are rising but incomes are not. So consumers cannot afford the same amount of goods or services they could before. Economists even created the Misery Index to quantify the suffering, defined as the sum of inflation and unemployment rate.
Interestingly, since it was first observed, stagflation has become a normal condition during recessions. Central banks love steady inflation (and fear deflation!). With inflation as a normal condition, it is not surprising that stagflation has been seen in most recessions.
There are many theories on why stagflation occurs. The first observed instance was precipitated by the oil price shock (a “supply shock”). But stimulative monetary policy (low rates, money printing) has obviously played a role in subsequent instances.
A prolonged period of stagflation is a credible risk facing the US (and global) economy in the years to come. Deflation now, stagflation later? Perhaps. It will be talked about a lot, so I hope this helps you understand the basics. That was Stagflation 101!
How To Use Burger Swap
I can't believe that I am sharing a tutorial on how to use "burger swap," but it is 2020 and this is crypto. Burger Swap seems to be all the rage now, replacing much of the liquidity and hype around Uniswap. It's based on BEP20, using BNB instead of ETH. If you are going to use it, might as well do it properly! Instructions are in the tweet thread above.
Investing 101 With Chamath Palihapitiya
Here is a fresh take on everything you need to know about investing as a beginner. My advice is similar, but it is always best to hear fresh perspectives. Plus this is coming from a billionaire, he knows his stuff. Chamath is a legend.
IRS Cracking Down On Bitcoin & Monero
The IRS released a bounty to the public asking for help cracking down on people using privacy coins. Citing criminal enterprises as their reason, the IRS has been failing to track private transactions on Bitcoin’s lightning network and primarily Monero. Bitcoin has become less private as it has developed, but Monero has remained untouched and anonymous. The bounty sent out was priced at $625,000 for a solution that can help track, trace, identify, or crack the privacy around these networks. It will be a bad sign for the crypto space if the government can pay its way into identifying private transactions, regardless of their intentions.
Apple Is Censoring Coinbase
Apple’s app store has been under fire recently from a number of major corporations using its platform. Brian Armstrong, the CEO of Coinbase, has taken to Twitter to call out Apple for, “holding back progress in the world.” Apple’s App store has thrown numerous hurdles towards the Coinbase Team, making it difficult for users to enjoy normal features of the app such as their product Coinbase Earn and their recommendation of DeFi sites and services.
Participants in the Coinbase Earn product earn free tokens when learning about the crypto community - a win-win. Apple, not a supporter of this product, has forced users to navigate difficult obstacles if they wish to use this product. Brian Armstrong wasn't sure why Apple wasn't okay with Coinbase users having the chance to earn money or even be recommended platforms, but guessed it may have to do with Apple Pay. It will be interesting to monitor the precedent this dispute lays out for future competition and censorship within the space. Keep an eye out for a more detailed blog coming soon on the subject matter.
The Wolf Of All Streets Podcast Ft. Ido Sadeh Man
Ido Sadeh Man is the founder of the Sögur token, a new digital currency that combines the best attributes of Bitcoin and stable coins. Before his deep dive into entrepreneurship, Ido was a Jazz musician in Paris. He later discovered blockchain and leveraged this technology to design a new currency, borrowing from the best aspects of Central Bank monetary policy while allowing people to store value in a safe way. As Ido sees it, national currencies are useful to nations, but SGR will best suit the global economy.
Ido and I further discuss their shared music background, the difficulties of becoming a successful musician, transitioning from entrepreneurship to the blockchain, the possible death of the dollar, the change from SAGA to Sögur, living on a Kibbutz, selling your Bitcoin when your taxi driver is talking about it, money and materialism, COVID exposing our financial fragility and more.
My Recommended Platforms And Tools
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Self-Directed IRA for Americans - allows you to invest in Bitcoin and any other asset for your retirement, with all of the tax benefits of a normal IRA.
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Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
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.