Wednesday, November 29, 2017

Bitcoins Roars Past $10,000

With Bitcoin (BTC) continuing its amazing run past $10,000, many will be wondering if the chaos will ever stop. In less than a month, BTC's value grew from around $6,000 to touch $11,000 on November 29th, 2017 to fall back below $10,000 in the same day. The gain has BTC's market capitalization rapidly approaching $200 billion, greater than most companies listed on the NYSE. In the span of a year, the cryptocurrency has established itself as one of the major financial markets in the world unifying interested investors behind a decentralized currency that has seen both support and opposition. Nevertheless, the media attention and allure of huge short-term capital gains has surely done its job in attracting new players.Volume over the past day is almost $6.5 billion on the massive BTC gains; this is up almost 10,000 percent from a year which saw a volume of just $65 million. With a volume of this magnitude fueling BTC market growth, one might wonder if the trend can continue when the crowd thins out.

"Even if you believe in bitcoin, the velocity of the move is a sign that it is parabolic. And parabolic moves don't last," Cramer from CNBC weighed in early Wednesday morning. It's completely rational to assume the inevitable, that the rally will eventually taper off and end in consolidation or worse. However, the key is to sense the timing in the market which could be short-term or long-term. One chart that provides an interesting view of the extreme growth in BTC is the logarithmic view of the price.

The logarithmic chart suggests that investors became increasingly attracted by the increase in the growth rate of an investment in BTC. This phenomenon is mostly seen in securities like new small-cap companies in an industry with prospects for major expansion, think semiconductors over the past two years. These investment opportunities typically break down when the growth of the rate of returns normalize and start to drop. Investors then rotate their capital into investment opportunities that they see as more profitable. This will no doubt occur in BTC markets as the currency surpasses its speculative pricing period. In 2014, BTC had a noticeably bad year pushing a lot of investors out of the market to find better investments. Volume dropped -56.6 percent and market cap dropped -52.4 percent based on weekly averages at the beginning and the end of the year. If a similar trend develops in the current BTC market, the losses would be devastating and could be an impetus for systemic weakness in other financial markets. The chaos continues. Investor be wary.

Getting Greedy with Goldy #1

Welcome to the first installment of “Getting Greedy with Goldy”. Every Sunday, I’ll post a quick hits look at potential turnaround plays for the next 5-10 trading days. I’m your author and guide to the reversal play world, Morgan Goldman. All you need to know is that I’m the old man of the crew, and I’ve been around the block a few times.

First up on the list, we’ll look at my current play, JCI.  JCI reported poor earnings and plunged from around $41 a share in early November to a 52 week low of $34.51.  From there, it quickly found support and began to move back up.  I recognized the bounce off an overreaction to poor earnings and purchased a position of 283 shares on 11/17 for a total of $10,282.32.

As of the close of market on 11/28, JCI trades for $38.38 and that position is worth $10,872.86, a return of 5.74% in 7 trading days, including the slow Thanksgiving week.  I’ll ride this train until it bounces off a resistance point ($39.50 or so) or breaks trend line in a reasonable way.  My stop loss is currently set at $37.82.

As always, Getting Greedy with Goldy is meant as entertainment, and any losses you incur are your own fault.   Remember that fundamentals of trading still apply, cut your losers fast, and ride your winners.

Onto this weeks’ potential plays!

GE – General Electric

I know, I know.  “Goldy, are you crazy?  The worst performing stock in the whole god business besides DRYS?”  Yeah, yeah.  Hear me out.  It’s clearly found a bottom at least short-term, which mitigates a lot of the risk.  The div cut hurts for sure, but who cares about income investors?  Go buy some bonds, grandpa.  It’s already begun to show the technical signs of a turn with MACD having converged and flipped, and RSI is still low.  Your potential upside is decent, with the nearest point of resistance being at $19.08 at the 20 day SMA. If it punches through that, you could see it climb back up towards the 50 day SMA, however, I doubt it has that much room to run with the overall bearish sentiment dominating the company.

Goldy’s Greedy.  Set your stop loss at $18.18, exit if it bounces off $19, otherwise, sell when RSI spikes or MACD signals a breakdown.  If it runs for a while, watch for a separation off the upper Bollinger Band and dump when that happens.

Potential profit; 4-6%.

SRCL – Stericycle

“Goldy, this company is literally trash!”  Who cares, kids!  We’re about technicals here, not fundamentals.  Go play with the smart kids in the big boys' pool if you want fundamentals.  We’re trying to get rich or eat ramen for the next 8 years trying.

Just look at the reversal here.  So juicy.  MACD is swinging positive, the stock has already added a couple percentage points, RSI is still lower than your grandfathers’ sack in a sauna, and we’ve got plenty of room before we hit either the 50-day or 200-day SMA.  Potential like this doesn’t come every day, especially not with such a pretty chart.

Goldy’s Greedy.  Put your stop loss 1.1% under your cost basis, and let ‘er ride.  Watch for resistance, as always, at 20-day SMA, then 50.  Should go right through the 20-day like a hot knife through butter, and ride up to the 50-day.  Watch for a bounce off the 20-day SMA, that would be bad news bears!

Potential profit; 8-10%.

TWX – Time Warner

“Goldy, Trump hates these guys, in the age of Trumpty Dumpty, why should I go against the establishment?  Aren’t you all about riding with winners?”

Historical precedent suggests the TWX-T merger will go through.  When’s the last time you can remember the DOJ blocking a merger of companies that operated mostly in two different business sectors?  Always play the odds, and the odds here suggest the merger will go through and the recent selloff will be long forgotten when the tendie train rolls in.  Technical aspects are also lining up strongly in favor of a reversal, as this reversal is already underway.  MACD has converged and flipped, RSI is already moving up off the deep bottom, and the general trend is upwards.

Goldy’s Greedy.  Put your stop loss at just over 1% under your cost basis, and see where it goes.  20-day SMA shouldn’t be a problem, and we could easily see a push back up to the gap at 92.  If it rides through that, 97-98 is a likely target price to get out if it runs out of steam.

Potential profit: 8-12%.

ESL – Esterline Tech Corp

“Goldy, I’ve never heard of these guys.  How does one justify investing in something they don’t know about?”  What did I tell you guys about fundamental investing?  Bye Felicia.

MACD hasn’t converged yet, but it’s closer than you’ve ever been to getting your cherry popped.  RSI is through the floor low at 23.  The drop from the 200-day SMA of $90/share has clipped off 20% of the market capitalization.  I don’t care what’s happened, that’s an overreaction unless you were conspiring with Al Qaeda or the DOJ is talking about breaking your company into pieces.  Or you “invested” in Biotech, you degenerate.

Goldy’s Greedy, but not quite yet.  This bun needs a few more days in the oven for confirmation.  Watch for the breakout over the next 5 days. Set your stop loss at about 2% back, and let ‘er rip.  Given the nature of the breakdown, I’d expect strong resistance around $74, but if ESL can move that, I could see $80ish pretty easily.

Potential profit: 3-11%.