Jan 12

A plan for protecting Bitcoin profits

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

It’s been a wild few weeks for Bitcoin. The last time I covered this cryptocurrency on my free blog was back in mid-December when it first broke the $20k barrier.

As I wrote back on December 16th:

I don’t expect this buying frenzy to cool off anytime soon. As I said [in early December], maybe the top is $25k, maybe it is $30k. Or maybe we keep going to $40k. Who knows. But when something moves this fast, the only choice we have is to grab ahold and see how far it goes.

This is a strongly directional move and we can (and should) follow this higher with a trailing stop. Right now $20k is a good level to protect our profits. When prices get up to $25k, we move our stops up again. $30k, ditto.

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To be honest, my initial $40k profit target was a tad optimistic, but BTC proved all of the doubters wrong and did something that seemed impossible only a few months ago.

But now the $40k euphoria is wearing off and we already find ourselves in the lower half of the $30k’s. This is definitely a challenging spot for Bitcoin. Prices rallied 400% from the October lows and anyone expecting this buying frenzy to continue another 400% is quite honestly, drunk on greed.

All good things come to an end and so will this latest surge in Bitcoin. Maybe this week’s brief poke above $40k was the near-term top for this rally. Maybe we get a little higher. Either way, we need to be thinking about taking profits, not pressing our bets. We only make money when we sell our winners. And unfortunately, as quickly as these things go up, they fall even faster.

Make sure you have a plan to take profits and don’t let these epic profits escape. Maybe you take profits proactively. Maybe you keep following this higher with a trailing stop. Or better yet, do a bit of both; take some profits proactively and follow the rest higher with a trailing stop.

But no matter what you do, have a plan. Only fools hold too long ride these things all the way back down.

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Jan 11

Do we need to worry about this political uncertainty?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slumped Monday morning as investors contemplated the disaster taking place in our nation’s capital. But as has been the case every other time recently, most stock owners shrugged and kept holding for higher prices.

To be honest, none of this political noise matters for corporate profits. If Trump gets impeached or if he doesn’t get impeached, Biden is still taking office on January 20th. The same goes for widespread protests over the week. The BLM protests didn’t hold stocks back last summer and Trump protests over the next few weeks won’t turn out any different for stocks.

The only thing that threatens this rally is a shift in investor sentiment. Up to this point, this has been an unstoppable rally and chances are good this modest wobble doesn’t change anything.

As I often say, a market that refuses to go down will eventually go up. Headlines are overwhelmingly negative and if this market was vulnerable to this political uncertainty, there have been far more than enough excuses to send stocks tumbling. Instead, most owners keep holding for higher prices and that confirms this is a strong market, not a weak one.

It gets a little tiring writing the same thing every day, but as long as we are making money, we have nothing to complain about.

While we are always on the lookout for the next big turning point, only a few of those occur each year. The rest of the time we stick with what is working. In this case, that’s holding for higher prices as long as the index remains above our stops in the mid to lower 3,700s.

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Jan 06

Should investors be worried by all of this political unrest?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Wednesday was a shockingly bad day for American democracy. But as dramatic as the pictures were from inside the Capitol, the stock market barely flinched.

As I wrote Tuesday:

It doesn’t get any more straightforward than this. [The S&P 500] is buyable above 3,660 and sellable/shortable if the index falls under this level.

The index opened just above 3,700 support and that was all the confirmation investors needed that Monday’s selloff was truly dead. A couple of hours later, frenzied buying pushed prices 80-points higher and the S&P 500 was carving out yet another intraday record high.

Unfortunately, the afternoon unrest at the Capitol dampened the market’s mood slightly before the close. But finishing up 0.5% on a day when the U.S. Capitol is ransacked by an angry mob shows just what a bizarre period in history this is.

As I often say, if the market doesn’t care about these things, then as investors, we shouldn’t care about them either. While it seems like the world is crumbling around us, as long as stock keep going up, there is only one way to trade this. A market that refuses to go down on bad news is one that clearly wants to go higher. Stocks took a breather in December and now they are rested and ready to start charging higher in January. There is only one way to trade this stubborn strength.

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Jan 05

A simple plan for Wednesday

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 kicked off 2021 with the biggest one-day loss since late October. Fortunately, Monday’s selling proved fleeting and the index rebounded smartly Tuesday, reclaiming half of Monday’s losses.

What counts more, Monday’s losses or Tuesday’s bounce? Good question.

The thing to keep in mind is one day of selling doesn’t kill a bull and a one-day bounce doesn’t end a dip. Quite simply, the information we need is coming Wednesday.

Tuesday’s bounce was definitely helpful for bulls. The biggest stock market crashes are multi-day affairs with no break in between. Tuesday’s bounce prevented this from turning into a runaway selloff. This is important because it gives stock owners a moment to collect their composure. And most of the time when you give stock owners the chance, they will choose to keep holding their stocks, ending the flow of supply.

As long as the index remains above Monday’s lows, expect stock owners to maintain their cool and keep holding for higher prices. Dip under 3,660 so soon after bouncing off of this level tells us Tuesday was a false bottom and lower prices are ahead.

It doesn’t get any more straightforward than this. Stocks are buyable above 3,660 and sellable/shortable if the index falls under this level. Plan your next trade accordingly.

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Jan 04

Did this weekend’s headlines finally kill the bull market?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The first trading session of 2021 got the new year off to a rocky start. The S&P 500 shed 1.5% in the biggest daily decline since late October.

Election uncertainty is flaring up. A super version of Covid-19 is spreading across the U.S. England is going back into lockdown. And the vaccine rollout is progressing far slower than planned. In all, it was a dreadful weekend for headlines.

But none of this should surprise anyone. The news has been dreadful for ten months and this latest spurt is nothing new. Stocks didn’t rally to where they are because our environment has been good. They got here because the future is a lot brighter than the present.

It’s common knowledge stocks are priced for what investors expect in six to twelve months. And so the question we have to ask ourselves is if anything that happened this weekend changes this six to twelve month outlook?

By this summer, the election will have long since been settled. Even with this slow vaccine rollout, most people who want a vaccine will have been given one by this fall. Or at the very least, the vulnerable populations and essential workers will be inoculated, allowing the rest of us to resume our normal activities without putting other people at risk.

If anything, this latest headline brouhaha increases the urgency for another round of stimulus. And if there is anything we learned from 2020, at least as far as the stock market goes, stimulus trumps everything else.

Monday’s selling could continue into Tuesday and even Wednesday. But this is nothing more than a minor wobble on our way higher. Two-steps forward, one-step back. Nothing meaningful changed this weekend and the prior uptrend remains intact. Any near-term weakness is giving us a buying opportunity, not an excuse to abandon ship.

As always, respect your stops. But if you get stopped out, be ready to jump back in as soon as this proves to be a false alarm. This latest dip will rattle nerves but it will also bounce far quicker than anyone expects.

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