Overview:

As the crypto market pulls back, the stock market continues to rally but is pushing into a tough area similar to the area the crypto market recently experienced.  Bottoming is a process and though “V” formations do happen, the structure of Bitcoin was conducive to a “V” type recovery.   The lack of symmetry gave us our initial clue, which was the reason we were being cautious here.  This why even though Litecoin was looking very bullish, the trade we issued was considered “very aggressive”, and we reduced our position accordingly.  If Bitcoin looked like Litecoin we would have been more optimistic but since the space as a whole is correlated with Bitcoin, we assumed if Bitcoin pulled back, so would the market as a whole.

In addition the chat room(s) are nearly completed which you can see the final beta version on your dashboard.  Now that they are complete we are creating a new page which will have several chat rooms depending on your subscription levels.  This was our top priority for the new year, enabling us to get more information out at a faster pace.  In addition we will be posting some day trades in one of the chat rooms as well for our expert swing members.

Once this is  completed the we are focused on our webinars.  We apologize for the delay.


BItcoin

Since Bitcoin has given back all the gains from it’s grind higher in one swing, we simply step aside.  This tells us that being overly bullish in the short term is pre-mature and though sentiment can change quickly, we need to see more evidence of a reversal.  Taking out the low of Dec27th would imply further weakness and a retest of the low or even a push to 2900 is quite possible.  This is within the tolerance we look for and a reversal at this level we would consider a double bottom variation.

Other than this nothing has changed other than we will wait to see how the market reacts over the weekend before determining our course of action.  Sounds boring I know, but we would simply be guessing here, and we need to see order flow providing evidence that this is where larger players are accumulating.  The support levels are still the same, nothing has changed in our analysis.  4500 is still  the level to break and 2900 is the level to hold.

 


Ethereum

We received more emails on Ethereum than any other coin out there.  More often than not patience pays off, and those that had the impulse to buy after a couple weeks of strength are now having buyers remorse.  Even if we hit the 161 level we were likely to see a pullback to the 130-111 support levels.  The current bar is telling us 111 may not hold, but we can only wait and see if we get a reversal pattern here.

I added one level to watch here and it is just above the psychological level of 100.  If Ethereum pushes through 100 without recovering right away, this would be a sign of trouble.  We just have to see what evolves.

 

 


Litecoin

Litecoin blew through initial resistance which was also the neckline of a H&S bottoming structure.  The trade we issued was considered aggressive due to its position.  There was the potential to push to the next resistance level due to the strength of the chart. There was both a continuation pattern and trigger, but this quickly fell apart which is the risks assumed when taking trades in these types of areas.  When taking trades in these positions we protect capital by reducing our risk.

When the probability of being stopped out of a trade is high, trades need to have a higher reward.  Litecoin provided the risk reward we look for in these areas which was the reason we chose it over Bitcoin.  We can not emphasize enough that whether you are trading Monero Pivx or other crypto instruments you are in reality trading Bitcoin.  Having 5-10 or more trades on in the crypto space exposes your capital to serious erosion.

Support levels have been added, but like Ethereum there is a psyhological level(29.5) that overlaps a technical projection that we are watching closely. There is nothing to do over the next couple days but see how the market plays out.  This is one coin we are looking to add to our portfolio based on the structure.

 

Crypto Summary

There is nothing to do but let the market reveal where buyers are stepping in.  Trying to trade this market is very risky and trades should be considered aggressive and positions should be reduced to lessen capital exposure.  It is that simple, this is not a time to be swinging for the fences but looking to get a base hit or two.


S&P

The S&P continues to show strength but this is a tough area for bulls.  The 2600 level is initial resistance area and we expect to see some trouble pushing through this area.  We are looking for a pullback here, as active market participants close out longs and short sentiment is starting to increase.

We are looking for support at 2500 initially and this is where we can look to sell puts with our aggressive options strategy.  In addition we have two contracts that expire today, and sold a covered call on CGC.


MPC

Marathon has almost a perfect reversal structure.  Initial resistance is around the 66.5 level and we can look for a pullback and the formation of a H&S patter here.  This has been almost the ideal trade so far and if the shares are called away today, we will have made around $450 per contract.

We want to own the shares for the long term, so on any reversal we will look to sell puts around the 60.0 area or lower if the market goes that direction.  The goal is to acquire 100 shares over time using our options strategy at a reduced cost or ideally for free. If MPC pulls back today towards the 61.50 level we will roll them out another week and gain more premium.

For those looking to buy the stock outright, we would exercise some patience and see if oil retests the 50.0 level.  This will likely lead to MPC pulling back to around 60.0 area where I would be a buyer.  I will likely buy some there myself in my long term portfolio.

 

 


AMD

AMD is the opposite of MPC where we took some pain after the last earnings report.  We were assigned 100 shares @ 26.0 back in late October and have collected a total of $3.00 in premiums since initiating the trade.  These Calls look to expire out of the money, but if it rallies today we will simply roll them out another week collecting an additional premium or Buy to Close our contract retaining the difference.

The 21.50 is still the area to push through so we will see how the market reacts later in the day prior to making a decision.  If the S&P was in a different position we would look to add a long trade here, but this is not the case.

For those looking to buy the shares outright I would be hesitant due to the position of the S&P and NASDAQ which are in a position to pullback some.  I would be looking to add around under 19.0 a small position if and when we get there.


Canopy Growth (CGC)

Canopy Growth is another stock we have taken some pain in, but the recent rally provides us an opportunity to sell covered calls into strength.  We want to own the stock outright in our cannabis portfolio, but have no issue with collecting some premium after CNBC has been pushing the stock recently.

This is one where there is risks of having the stock called away, which is why we like to have 200 shares of any stock ideally.  This allows for more flexibility, but because it is so expensive, and we are limited to the 10k we have allocated for cannabis stocks, we do not want over exposure when pushing new lows.

However CGC has pushed through the previous consolidation area and is approaching the secondary resistance area.  We were assigned the stock @ 38.50 and have collected a total of $5.70 in premiums using options.  Overall our per share costs sits at 32.80 so having them called away here is a little more than 13% trade profit since OCT 24th.

These do not expire till next week so there is some time left, but we wanted to provide an update from our posted trade yesterday.

 


NBEV

NBEV is showing some signs of strength but is having trouble getting some momentum here.  We are looking at the $7.0 level to sell Covered calls against half of our shares.  Currently our average cost is 3.33 but we do not want to have these called away on the cheap which is why we will only sell one covered call.

If the market as a whole pulls back we will look at the 4.50-5.0 area to sell another put.

We just want to bring this up as the cannabis market is highly volatile and we want to take advantage of market sentiment being overly exuberant when we can.

Summary

With the crypto space in an initial recovery we have to remain conservative and exercise caution with any swing trades.  Adding small amounts of coins at these lows is not unwarranted, but we do not want to get overly optimistic and see further pricing pressure.

The stock market is looking more like a recovery than a continuation lower, but again coming off lows we have to remain cautious, selling into rallies, and being conservative when buying.

As always feel free to ask questions or comment below.

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3 Responses
    1. Andrew Gonci

      I am a buyer at 1410 and have an order in to get ahead of you ;). We could I just don’t see it in the near future unless we push through 2800 which I think it will be difficult to do. Let’s see.

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