Is a Christmas Crypto Rally Incoming?
Is the bottom in? My long-term outlook, plans for buying and selling, and some stock trades I took this week.
Is the Bottom In?
I bought Bitcoin this week! It feels good man. This is the first time in a long that it seems like this could be a long-term investment rather than just a trade.
I think there's about a 55% chance that the bottom is in. However, buying the bottom is overrated. Most of the money in crypto is made during bull markets. We're definitely not in a bull market yet. I don't see any major catalysts to get us there. It could take months before crypto really starts ripping again.
So, I only bought with 5% of my crypto portfolio, I have a stop loss in place, and I'm prepared to take profits early if the market doesn't continue to show strength. I'll continue to allocate additional capital if we go above key technical levels. I'll show you where I'll be buying and selling after I cover my bigger picture outlook on the monthly chart.
Long-Term Outlook
In the wake of the FTX collapse, Bitcoin broke below the 2017 all-time high around $20,000 which had served as support. This move also broke below a 5-month long support level on the weekly chart around $19,000. The next lower level of support on the monthly chart is around $13,850.
Bitcoin has found support at a level on the weekly chart from early 2018 around $16,125. I don't believe that this is a meaningful support level because it was from so long ago, but it is supporting.
The bear market has lasted for about twenty months, and it's pulled back about 75%. This is within the ballpark of past bear markets.
The stock market has been rallying for nearly two months and the dollar has been pulling back for nearly two months. This bodes well for crypto.
My Gameplan for Buying More Bitcoin
The first entry on the "Buy Strength" trade plan that I shared in last week's issue hit on Wednesday. The daily chart made a new swing high, above pre-Genesis news levels, around $16,700. I bought here.
My stop loss is below the 2018 weekly support level around $16,125. Going below this level would also mark a lower low on the daily chart, which is bearish. My medium-term target is $24,000.
This is an ambitious target given that it's unclear if the bottom of the bear market is in and we certainly don't have any signs of being in a bear market. I'll continue to re-evaluate price action and adjust my plan. I would love for this to turn into a long-term investment with a much higher price target, but I'll need to see much more evidence of strength first.
I'll put an additional 5% of my crypto portfolio to work if Bitcoin reclaims above the June wick low around $17,585. I would start getting very bullish, and buy more, if we go above $19,000. $19,000 might serve as resistance first though so I'll be watching closely if we get close to there.
I'd also love to buy dips anywhere around the next levels of support on the monthly chart around the $10,000 to $14,000 range. At prices this low, I would consider putting more significant amounts of money to work and holding it as a long-term investment.
Stock Trades and One Altcoin Trade
Here are a few other trades I took this week:
I bought an altcoin called Optimism (OP). Optimism seems to have formed a range on its weekly chart. However, I didn't buy at the range low, around $0.84, because buying altcoins in an environment like this is extremely volatile. I waited for a swing high on the daily chart around $0.95. My target is $1.38. My stop loss is at the weekly range low.
The Shopify (SHOP) trade that I shared in the very first issue of this newsletter is playing out nicely. Shopify reclaimed it's Covid low then made a new swing high on the weekly chart when it broke above $35. The weekly chart has started to form an uptrend, which makes me bullish medium-term, but short-term, it might be due to cool off a bit as it's hitting a minor resistance level at $45.50.
I bought a little Box (BOX), GitLab (GTLB), Coinbase (COIN), and Snowflake (SNOW). Those trades are in profit.
I bought Bank of America (BAC), but my stop loss was hit today. I'm looking to buy it again if it goes back above $37.
I'm watching Okta (OKTA) to buy on a pullback, Toast (TOST) to buy if it shows strength, and Bitfarms (BITF) to buy if it goes lower.
What I'm Looking for Next
I'm looking for Bitcoin to continue to rally over the next couple of weeks. I think there's about a 55% chance that the bottom is in.
We haven't started an uptrend on the weekly or monthly charts though, so I'm not putting significant amounts of cash to work or forming long-term positions.
I'm bearish if we go below $16,125. I'd be looking for it to go down further to $13,875 and I would likely buy there.
I'm bullish if we go above $17,585, and even more bullish if we go above $19,000. I'll continue to allocate my portfolio as the market continues to show strength.
The Genesis/Digital Currency Group situation continues to loom. News about them has the potential to move the market significantly, so I'll be on top of that.
There are always reasons to be bearish. There's never a "perfect" time to buy. But I'm short-term bullish. I'll continue to re-evaluate and manage risk, as always.
Have a good weekend!