It has been just over a month since it happened.
It has been just over a month since it happened.
It may have been subtle to many or even most at the time, but now, a month later, what happened a month ago is risking a reversal. Once again, this move is starting off by looking a bit subtle, but when we dive into the charts, we can see it, we can understand it, and we can figure out what pattern looks possible if not probable.
What am I talking about? I don’t want to ruin the punchline, so I’ll simply walk through the whole process, and then let you see what I’m looking at that would traditionally be a part of my Outlier Watch List as a result, and it likely will be whether this move gets started or not before the end of this week.
The first chart that we all love to hate because it’s such a volatile sector (and don’t worry, the final idea will be a much less volatile one) – Bitcoin:
As you can see, On February 26th, bitcoin started its main breakout. As people looked at crypto currencies, a natural tendency was, of course, to look at another US Dollar alternative – Gold:
And there it went. Gold started to play catchup a couple of days later on March 1st. However, the real story to me wasn’t gold here. It was the price of bitcoin RELATIVE to the price of gold, seen here:
As you can see, the price of bitcoin divided by the price of gold started to spike on February 26th and quickly stabilized in the recent range between 28.5 and 34.0 once gold started to rally, too. But that range is at risk here. After that pricing ratio fell through some key moving averages, it is testing the lows of the range once again.
So, what does this all mean and how can I leverage it with a trade? One of two scenarios has to happen, with the first option being that the range will continue to hold, in which case either bitcoin will rise, or gold will fall. This would then allow bitcoin’s price relative to gold to hold. Alternatively, the range fails, and that would most likely come with a fall in bitcoin. But, in that case, it would naturally lead to a fall in gold if gold were truly dragged up by bitcoin rather than fundamentally bullish on its own.
I have reason to believe that gold is NOT bullish on its own that I can’t explain here due to lack of space in an e-mail, and so I will wrap this up with a trade idea. I’ll be looking at gold miners, here represented by the sector ETF GDX:
On March 1st, GDX was testing lows of its range and setting up a potential break down to new lows. Now, it’s at recent highs, and has a lot of downside if my trade thesis is correct given that GDX has ~20% of downside to return to its price from March 1st. And with a large number of highly liquid stocks in the gold miners sector, I can look for an idea with a highly leveraged options trade to turn a seemingly large potential move into an even larger potential profit. And it’s all because both scenarios that I can see as most likely involve a bearish gold environment.
Remember, if you see a leading indicator, the best trade is often in the lagging sector if you can identify it quickly.
So, as always, please go to http://optionhotline.com to review how I traditionally apply technical signals, volatility analysis, and probability analysis to my options trades. And if you have any questions, never hesitate to reach out.
Keith Harwood
Keith@optionhotline.com
See Related Articles on TradewinsDaily.com
Spotting Where Money Will Run As Market Weakens
Chart of the Day: Snowflake (SNOW)
Time To Look At These Short Candidates
This Stock Is Set To Climb As Markets Fall
Cannabis Stocks Could See Higher Highs this Year
© 2024 Tradewins Publishing. All rights reserved. | Privacy Policy | Terms and Conditions | Contact Us
Auto-trading, or any broker or advisor-directed type of trading, is not supported or endorsed by TradeWins. For additional information on auto-trading, you may visit the SEC's website: All About Auto-Trading, https://www.sec.gov/reportspubs/investor-publications/investorpubsautotradinghtm.html
TradeWins does not recommend or refer subscribers to broker-dealers. You should perform your own due diligence with respect to satisfactory broker-dealers and whether to open a brokerage account. You should always consult with your own professional advisers regarding equities and options on equities trading.
1. The information provided by the newsletters, trading, training and educational products related to various markets (collectively referred to as the "Services") is not customized or personalized to any particular risk profile or tolerance. Nor is the information published by TradeWins Publishing ("TradeWins") a customized or personalized recommendation to buy, sell, hold, or invest in particular financial products. The Services are intended to supplement your own research and analysis.
2. TradeWins' Services are not a solicitation or offer to buy or sell any financial products, and the Services are not intended to provide money management advice or services.
3. Past performance is not necessarily indicative of future results. Trading and investing involve substantial risk. Trading on margin carries a high level of risk, and may not be suitable for all investors. Other than the refund policy detailed elsewhere, TradeWins does not make any guarantee or other promise as to any results that may be obtained from using the Services. No person subscribing for the Services ("Subscriber") should make any investment decision without first consulting his or her own personal financial adviser, broker or consultant. TradeWins disclaims any and all liability in the event anything contained in the Services proves to be inaccurate, incomplete or unreliable, or results in any investment or other loss by a Subscriber.
4. You should trade or invest only "risk capital" money you can afford to lose. Trading stocks and stock options involves high risk and you can lose the entire principal amount invested or more.
5. All investments carry risk and all trading decisions made by a person remain the responsibility of that person. There is no guarantee that systems, indicators, or trading signals will result in profits or that they will not produce losses. Subscribers should fully understand all risks associated with any kind of trading or investing before engaging in such activities.
6. Some profit examples are based on hypothetical or simulated trading. This means the trades are not actual trades and instead are hypothetical trades based on real market prices at the time the recommendation is disseminated. No actual money is invested, nor are any trades executed. Hypothetical or simulated performance is not necessarily indicative of future results. Hypothetical performance results have many inherent limitations, some of which are described below. Also, the hypothetical results do not include the costs of subscriptions, commissions, or other fees. Because the trades underlying these examples have not actually been executed, the results may understate or overstate the impact of certain market factors, such as lack of liquidity. Simulated trading services in general are also designed with the benefit of hindsight, which may not be relevant to actual trading. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. TradeWins makes no representations or warranties that any account will or is likely to achieve profits similar to those shown.
7. No representation is being made that you will achieve profits or the same results as any person providing testimonial. No representation is being made that any person providing a testimonial is likely to continue to experience profitable trading after the date on which the testimonial was provided, and in fact the person providing the testimonial may have experienced losses.
8. The author experiences are not typical. The author is an experienced investor and your results will vary depending on risk tolerance, amount of risk capital utilized, size of trading position and other factors. Certain Subscribers may modify the author methods, or modify or ignore the rules or risk parameters, and any such actions are taken entirely at the Subscriber's own election and for the Subscriber's own risk.
|
0 Response to "Spotting Where Money Will Run As Market Weakens"
Post a Comment