The US Dollar continues to sell off as another round or a Trillion Dollar plus stimulus package is likely to be approved this week. Stocks are poised to rally, but we take caution that this may be a bull trap based on the price structure and headwinds in the market.
Yet all this uncertainty is good for Metals and appears to be giving a boost to Bitcoin.
Regardless we are being overly cautious this week, in light of the selling pressure that occurred over the last week or so.
Do not forget to tune into our Radio Show at 4:05 pm today or if you are able to watch it on our YouTube channel you can follow along with the charts live. Reminder this will be The Henry Raines Show’s last week so make sure to tune in and feel free to call in as well.
Finally Bitcoin making a significant swing higher and this may just be the beginning of a broader swing back to the All Time High around 20k. Is it going to get there in a month or two? Probably not, but if we can take out the 12,250 level that would go a long way in confirming a move to new highs.
Bitcoin like Gold, is a very technical trade, but until we get a picture of the structure it is not very clear where we are in the cycle. Looking for 12,250 to trade in the near term, which puts us in a wave 3 of a broader wave 3 and wave 5 cycle.
Our trade we entered back in mid June is finally playing out hitting our 2nd target and poised to hit the 3rd. We sat through a lot of crap and sideways action over the past month, but if you are not in when these moves happen, you often miss the brunt of the move.
IF 10k holds over the next couple of days, probabilities favor a push higher and this should attract break-out traders and those that have sat on the sidelines waiting for the inevitable dip to 5k.
In short Bullish on Bitcoin, but we are also seeing some of the alt coins, specifically Ethereum, start to show favor with investors and traders as well.
If you are not in this move, at this point it is conservative to wait for either a continuation setup to evolve or a pullback with bullish setup to go long.
I provided a EW count as a roadmap for targets. Does not have to play out this way, but it provides a basis for a trading strategy. We also have several overlapping Fibb extensions around the 11,600 level, which provides a nice target area for maybe trimming out a little risk on any bearish reversal signal and look to buy the pullback.
The tech sector has led the rally off the March lows, and though it is showing signs of a top, would not be surprised to see an attempt at a new high.
The key level here is taking out 10,750. IF the market fails to take it out in the next couple of days probabilities would favor we are starting a broader pullback. A few things to point out here.
First we can not ignore the bullish momentum and trend that is still in tact here. We took a short trade with the Nasdaq, Q’s, DAX and sold a naked call on the Q’s last week, hitting our first target in the first three, and closed out our Short Call on the Q’s for a nice little profit.
Still a little early to be aggressively shorting the market, but the position was favorable and then getting an inside candle off the double top met our criteria for an aggressive short.
Making the bearish case we now have a double top and a potential lower low, though if 10,750 is taken out, this may be a failed low situation. We are looking for shorts and aggressively closed out our long swing positions, trimmed down our holdings and raised some additional cash.
There are always bullish setups in the market, but you do not always get a 2nd chance to get out of a position, so if we are going to error, it is going to be an error on the side of caution.
Support levels of interest our 10,350 initially, for which we do have a bullish setup to go long if we take out 10,600 after the open. Below this 9750, and finally 9400-8950 which is an area we will look for a bullish reversal to go long again.
How low can we go? Nobody knows, but we want to have ample cash on deck to take advantage of any selling pressure.
Like Bitcoin, gold had over a 2 month consolidation before it broke higher. All our Futures or CFD targets were hit in both our gold trades, but we are not out of the trade yet.
We still have positions in the miners, and Gold appears to be gaining momentum higher. With 1850 cleared, we are looking at 2100 to potentially trade, and at our broader target of 2350.
However we are not adding any positions here, rather we are letting our current positions run. Eventually the FOMO dies out and we are looking at a pullback to the 1850 area for us to be interested in adding a trade.
As far as stacking goes, I personally have been trimming out small amounts since 1650. IF you have followed me for sometime, I have mentioned before that I stop adding physical Gold at 1350, and Silver at 18.00. I then start taking profits into strength above 1650.
Sure I left some money on the table, but I can always use miners or GLD, SLV to position or hedge against my sell orders. This is how we are looking to trade Gold moving forward. Not a buyer of physical here, premiums too high, market too bullish, so the alternate trade is stocks.
Currently we are long GDX and KL, though some of our members including Marc opted for NEM or GOLD. However we will be trimming more off into strength here. You can always get back in, but you can’t always get the same sale prices.
Broader term, bullish on Gold for 2350 going into the end of the year.
The Dollar Index is gaining momentum to the downside, with our next support level at 93.00. IF we take out 93.00 expect this to rattle the stock markets. Purchasing power for those in the US goes down, and this ripples through not only the US economy, but the global as well.
We were short the dollar via GBPUSD which hit our 3rd target this morning, and with the Dollar at such an extreme level, we are looking for alternate pairs like the EURGBP to trade this week.
Do not like the position of the Dollar for a short, surely do not like the momentum and trend of the Dollar for a long yet.
Stocks We Like
There are a lot of bullish reversal setups off the pullback last week that we are interested in. However this is where we have to be very picky and cautious as to what we take and the size of our position.
The overall market is in a vulnerable position which we can not ignore, but there are some stocks that are worth taking a trade on.
One way to handle the current market conditions is taking very small positions, or Buying a Call which limits your risk to the price of the Call.
We will be looking at several trades this week for our paid subscribers, but here are a few on our radar.
Pinterest has a beautiful structure and a bullish pinbar to go long. Going into earnings 35.0 can trade here.
Few things I like about Pinterest other than the structure.
- This is not a market stock, so it can trade on its own
- Going into earnings stocks like this tend to grind higher.
- With still many people staying at home, Pintrest is a perfect site to get ideas on gardening or other stuff to do around the house.
Looking at a long in Pintrest, but again we can not ignore the market position and environment so we will either be taking profits quickly, or using Long Call options as a way to take the trade.
Sea Limited is also another on our trade radar. Great structure and a failed low situation forming as a bullish pinbar to go long. The 140.0 level can trade here, but the risks are the same as Pinterest.
Regardless on our radar for a long especially with the risk measured from the 100.0 level and a decent probability of at least hitting 120-130 on a good rally.
Bullish on Bitcoin and Ethereum, caution with Gold and Stocks. Need to tread very cautiously and take profits when you can not when you have to. Looking for Long USD, but until we see some sort of a bottom, we will look at some alternate pairs to trade in Forex.
As we enter August, the election and sentiment about the election will become more and more a concern to the markets.
Volatility and uncertainty is likely coming in the weeks ahead.
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