Weekend Update: The Week Ahead

A situation has arisen In which I have to take a few days off. I have handed the keys to the Short-Term Trading Kingdom to a very capable colleague (he's our regular stand-in guy) so no real changes for the Prime service. As for the Classic's Tuesday-Thursday updates, more than likely it will be just the updated tables, and if necessary, any Trade Alerts. Thank you all for your understanding. I'm flying mostly solo here so if a wing gets clipped, well, I take a few days off. 

Leading Off: Special Situation Portfolio & Bitcoin

It's Saturday morning and bitcoin is trading at $16,800, up 25% over the past seven days. It has now retraced 61.8% of the mid December mini-crash from $20,000 to $11,200. To say it is at a key level is an understatement to say the least. A strong push above $16,700-$17,000 and it will surely tag $20,000, with $25,000 then in its sights. 

The chart below shows a classic Wave 5 Buy Signal set-up, with last week ending with a thrust out of the trend regression channel, triggering the signal and setting a target window for between $22,000 and $28,000. Bitcoin is, or at least trades like, a commodity that makes it particularly susceptible to EW analysis. 

All three of our bitcoin-centric stocks will benefit from the next leg up in price. I'd like to see bitcoin take out the $17,000 level before getting too giddy about that next leg up, but giddy and bitcoin seem inseparable these days. If you see $17,000 taken out this week, expect GBTC to trigger a fresh Buy Signal above $2,450, if it hadn't done so already. 

There are other bitcoin-sleeper stocks that could be added to this portfolio in the weeks ahead, and I am particularly interested in a few that carry liquid options. Not so much for leverage on the upside, bitcoin takes care of that itself, but for outstanding opportunities to profit from the next 45% "consolidation" that almost certainly lays ahead...but from much, much higher prices. 

Trading Portfolio

Mea Culpa 

Below is a chart of one of the worst trades of the year, the September 14th Buy Signal in the Dow/SPY.  Although we made a nice 92% gain on those calls before just barely  being stopped out on October 25th, had we held onto those calls, with one rollover in Nov, we would be up about 700% (see max option return column in table below).  What is our take away? The system is good, it uncovers some gems of a trade, but implementation has to be better. One trade like that can make a year and we have to have a better way to be in it. 

Needless to say, I'm on it. Tweaks happen.