Author Archives: Lucas

Is Bitcoin Rallying to a New High?

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Not long ago, I blogged about Bitcoin’s recovery and how retail investors could invest/profit during such a scenario. As of 30th September 2021, Bitcoin’s (BTC) attempt to break the USD50k resistance came with a very strong buy volume. As always, anything can happen in the cryptocurrency market and investors shouldn’t be surprised if there’s a sudden dip in BTC’s price action the next day — our strategy here is to play the long-term game while we buy/sell BTC during a bull rally.

Bitcoin looking good (for now)

It has been proven from time to time that unlike the stock market or forex, Bitcoin will not react to major news half of the time — there were instances where BTC continued to be bullish despite the release of severely negative press, and vice versa. Given this characteristic of BTC’s, I shall only focus on the technical analysis of its charts because that’s the closest we can get into studying BTC’s price action. Hence, we shall take a look at its latest chart (8th October 2021) on the daily timeframe:

Bitcoin (BTC) daily chart as of 8th October 2021.

Item A: On 23rd July 2021, BTC started a convincing bull rally that broke above its EMA20, EMA50, and then EMA200 resistances before a minor breather.

Item B: BTC carried on to break above its USD40k resistance without any effort, and this run continued to reach just above its USD50k resistance before meeting heavy rejection at USD52k (probably investors taking profit after the bull rally from USD30k).

Item C: It’s natural that after such a strong rally upward, its price action would go into some sort of a correction. BTC did just that and found support at USD40k and its EMA200 line, which gives us a clear higher-low from USD30k, and is forming what seems to be the initial stages of an uptrend pattern.

Item D: This time around on 5th October 2021, BTC managed to break above its USD50k major resistance without much of an effort, and with majority strong green candles. If it’s able to turn this resistance into a support, then that would be a good sign of things to come. The next major resistance would be at USD60k where we can expect to see BTC get rejected more than once. And if it successfully converts USD60k into a new support, that’s when we may see a rally to a new all-time-high.

How should I invest from here?

As always with Bitcoin, I suggest that the simplest form of investing into this market would be to plan for long-term gains. Trading over the short to mid-term can be very challenging especially with its volatility and unpredictability of pumps and dumps happening every now and then.

At current prices, you can invest with a small portion of your capital that you won’t be touching over the long-term. Keep doing this whenever BTC conquers a major resistance level and turns it into a support, while its chart shows a clear uptrend with higher-lows and higher-highs, especially on the weekly timeframe chart. Again, it’s better to invest while the chart is on a bull rally so that you have the choice of withdrawing profits and/or your initial investment capital.

The same goes with those who have been invested in BTC at much lower prices. It’s advisable to at least withdraw your initial capital and let your profits continue to do the investing, while you allocate that initial capital into other forms of investment.

If BTC happens to dip all of a sudden and your portfolio is in the red because of this, just remind yourself that you’re invested for the long run. After all, BTC has proven to have strongly risen in value over the past many years despite its very volatile nature.

How to weed out a solid stock during a bear market

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For this article, I’ve picked Etsy as an example of a solid stock to look out for during a bear market. Just a brief introduction; ETSY (Etsy.com) is an e-commerce business that connects buyers with sellers of handmade/vintage items, as well as craft supplies. Products listed on its website, Etsy.com, ranges across jewelry, clothing, furniture, toys, and more. As of today, Etsy receives majority of its sales from the USA and Canada with plans to expand its service into other continents in the near future.

Why is ETSY a solid example for this?

While a company’s fundamentals may contribute plenty to how its stock value performs, the price action on its chart is equally as important. There are times when we, as retail investors, find ourselves clueless as to why a stock is suddenly bullish or bearish. This is most likely due to insider trading and/or institutional investors moving a huge amount of capital in or out of that stock. And this is where technical analysis of its chart comes in — studying a stock’s price action to determine if a large enough volume of capital is flowing in or out so that you can make a decision in the early stages of a bull rally or correction.

And for this, I’ve picked ETSY (a stock which I’m invested in) as an example where large volume of institutional capital has been flowing in during early September 2021. Below are both the daily charts of ETSY vs the S&P500 (SPY) as of 23rd September 2021:

ETSY daily chart 23rd Sept 2021.
S&P 500 (SPY) daily chart 23rd Sept 2021.

The first chart belongs to ETSY while the second one belongs to SPY. So, why am I comparing ETSY to the S&P500?
It has been historically proven that most of the time when there’s a sell-off in SPY, majority of stocks on Wall Street will be in the red, too. Especially when there has been more than a week of heavy selling volume on SPY. While some investors will choose to stay out of the market until the selling slows down and the buying volume picks up, there may be a few stocks that will outperform the SPY during its sell-off period. And that’s a good sign for said stocks.

As seen in the ETSY chart above…
Item A: Outlines a very bullish trend that has been building an upward momentum with majority of its daily candles in the green while the red candles are lesser and shorter. It even broke above ETSY’s USD210 resistance level without much effort and converted it into its current support (and has proven to be strong). Also, it has been able to stay above the EMA20 (red) line and is now testing its USD224 resistance.

And when you compare ETSY vs SPY…
Item B (on both charts): For 2 weeks straight since 7th September 2021, the S&P500 (SPY), QQQ, Nasdaq (NDAQ), and Dow Jones (DJI) has seen heavy selling volume across the board. Most stocks on Wall Street struggled to fend off this bearishness and followed the downward momentum.

On the other hand, there were a few stocks that were resilient towards this sell-off in the general market, and even went on to form solid green candles on its daily chart. One example of this is ETSY. While SPY was on a downtrend for two weeks in a row, ETSY managed to stay above its USD212 support and even tested its USD224 resistance while most of the market were breaking support levels. This alone shows that there’s heavy buying volume confidently pouring into ETSY. Not to forget, this was happening during a period when there were bearish news such as inflation fears, tension between China vs USA, global supply chain struggles, etc. For a stock to be bullish during a period such as this is definitely good news for its investors.

Takeaway

ETSY is just one of many examples of resilient and/or bullish stocks that you can look out for during a bear market. However, this doesn’t guarantee 100% that the stock will continue to be just as bullish in the long run. As investors, we should do our homework into ensuring that our investment meets the basic criteria of a solid company so we can be more confident that said company will have a high chance to survive through a bear market and come out on top in a bull market. Here’s what satisfies my criteria of a solid company to invest in:

(1) it has a strong moat vs its competitors
(2) its business is inflation-proof or has a history of overcoming inflation fears
(3) it has been beating earnings estimates for the past 4 or more earnings calls
(4) its management is known to be solid and is good at handling PR matters
(5) isn’t a penny stock (low trading volumes in a stock will allow for pump and dump schemes)
(6) and of course its stock’s chart needs to be in a bullish trend as described earlier on in this article.

At the end of the day, we’re in the stock market to invest in great companies. Thus, with ETSY’s bullish scenario as explained above, investors should only pick great companies that meets the above mentioned criteria, and also it exhibits a similar bullish scenario during a bear market.

Bear Market Around The Corner?

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A tweet by veteran trader, Mark Minervini, on warning signs that a market correction is coming to the US stock market.

The US stock market has seen heavy selling volume during the first week of September 2021. This is due to a combination of post-earnings season profit-taking, unfavorable economic indicators coming out of the US and China, rise in Covid-19 cases in developed countries, and more. As advised by Mark Minervini on his Twitter post (shown above), it is currently safer to take profits if you have any, and lighten or close your positions if you recently got into a trade. If you’re not doing any short selling it is best to have capital on the sidelines while you wait for the selling and downward trend to fade away.

What is the gameplan after this market correction is over?

If you’re doing mid to long-term trades, the first thing to look for are trades among megacap stocks that have strong financials and/or ETFs like S&P 500 (SPY), QQQ, or Nasdaq (NDAQ). Growth stocks such as Apple (AAPL), NVidia (NVDA), Shopify (SHOP), and more, tends to go on a bull rally whenever the overall market is recovering. I’ll post an update when there are signs that the selling has slowed down and the market in general are recovering. Until then, remember to take profits and protect your capital during a market correction.

My Preferred Broker (for Trading Stocks)

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In this post, I’ll share with you the broker I’ve been actively using for my trade activities on the U.S. stock market. This is so that it will be easier for me to communicate with you if I need to cover the technical aspect related to the broker. It will also be beneficial for beginners who are looking for a stock trading broker to settle down with.

Interactive Brokers

I’ve been using Interactive Brokers (IBKR) since I started my journey into Wall St. It has one of the lowest trading commission rates around, and the widest variety of variety of tradable securities including those on foreign exchanges. The one drawback of trading on IBKR’s trading platform, Trading Work Station (TWS), is that it isn’t user-friendly especially for beginners. But it will be fairly easy to use once you become familiar with its interface.

Opening an account

You may visit their website by clicking here to register an account with them. On the top right hand corner, click on “Open Account > Start Application”. Follow the instructions carefully. The application process may be thorough due to regulations that brokers need to follow, so please bear with it. Also, when it comes to the application requesting details about which trading tools you prefer to use, make sure to go with stocks, ETFs, CFD, and Options.

How to use Trading Work Station (TWS) software

Once you’ve registered and gotten your account approved, you may refer to this YouTube tutorial video on how to install and begin using their trading platform, TWS: https://youtu.be/_SbYfTWbWcU

Next, you will need to learn how to place Buy/Sell Orders for a security. For beginners, it’s better to use Limit Order (LMT) when you buy a security, and Stop Order (STP) when you want to sell a security that you own. Please practice to key-in the figures manually when it comes to BOTH the quantity of security and the price target that you prefer to Buy/Sell at. You may learn the basics of that by clicking on this article here.

How I place my Buy/Sell orders

The interface of my TWS may look and feel different than yours due to the version and me setting it on “Classic” mode. But the process of adding a stock and placing a buy/sell order is similar:

Step #1: Add the stock to your TWS

Click on an empty row on the left most column as shown above, then type in the ticker symbol of the stock (eg. ‘sq’ for SQUARE). Next hit the <Enter> key.

A menu will then appear for you to select which type of trading tool you want to trade this stock with (standard, Options, CFD, etc.). If you’re new, you should select Stock.

Step #2: Select a Buy or Sell order

Right click on the ticker symbol of the stock, and a menu will appear. Then click on ‘BUY’ to long a stock or ‘SELL’ to short a stock or close your position if you currently have any.

Next, a row of details related to your Buy/Sell order will appear right below the stock. This will allow you to key in details for your order. Here’s what it consists of:

Quantity: The amount of stocks or contracts (if you’re trading Options) you wish to buy/sell. Manually key in the amount (eg. 5) just to be safe.

Time In Force: Make sure to select ‘GTC’ instead of ‘DAY’. This determines how long your order will last. Choosing ‘DAY’ means your order will last until the end of the trading day. ‘GTC’ stands for Good-Til-Canceled, which means your order will last until it has been filled or if you cancel it.

Type: The type of order you wish to execute. For now, just select ‘LMT’ (Limit Order) if you’re buying the stock or ‘STP’ (Stop Order) if you’re selling your position.


LMT Price: Manually key in the target price (eg. 270.32) you wish to buy the stock at. Note that you may not get it at the exact price BUT you’ll get a price that’s close to your target. This is due to the demand and supply of investors buying and selling the stock.

STP Price: Just like LMT Price, this one is used for Stop Orders, which you should key in manually if you plan to sell your position in the stock.

When you’re done filling up the details for your order, and double-checking it you may click on the ‘Transmit’ button to confirm your order. Until then, if you would like to sell your position in this stock just right-click on the Buy order row and select ‘Sell’. The sell order works the same except you will be selecting a ‘STP’ (Stop Order) instead of ‘LMT’.

If you’ve any questions about the tools/services listed here, feel free that to contact me. I’ll be more than happy to guide you on how to open an account as well as using TWS!

Visa (V) Looking Attractive

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Visa (V) daily chart as of 1st Sep 2021.

During pre-pandemic period, Visa (V) and Mastercard (MA) were attractive megacap stocks to invest in. It only makes sense as both companies were profit-making machines. However, now that the pandemic is still rampant, a large portion of their revenue has taken a hit due to restrictions on cross-border travelling and physical leisure activities. However, this doesn’t remove the fact that Visa and Mastercard are solid stocks to invest in as the world is trying to recover from this pandemic at an urgent rate. Also, there are signs of inflation in the works and this will be a tailwind for Visa as the increase in price of goods and services benefits the commission that Visa gets from each transaction made.

Is it a good time to enter Visa now?

In this post, I’ll focus on Visa as it historically outperforms Mastercard and almost any market catalyst would affect both in a similar manner. First, we shall study Visa’s daily chart (as of 1st Sep 2021):

Item A: Visa got rejected at the USD251 resistance and continued its downward trend with heavy selling as shown by the overpowering number of long red candles, breaking previous support levels. Not a good time to be invested in Visa even if you’re buying the dip.

Item B: Strong bearish signals with the candles being easily rejected from the EMA 20 (yellow) trend accompanied with 3 red candles each time. This alone shows that investors are skeptical of Visa’s current valuation — the daily candles weren’t even attempting to test the EMA 50 (blue) trend.

Item C: Solid downward candles attempting to break below the USD230 support with low buying volume is a strong signal that the chart will most likely see further selling strength. Considering there is no bullish news in the near future.

The game plan

Visa is built on strong fundamentals and has proven to be a cash cow during the pre-pandemic period. They have strong partnerships with huge online brands like Google, Facebook, etc. and the pandemic has only accelerated the adoption of cashless payments, globally. While the current sell-off in Visa’s chart may not be encouraging there still are tailwinds (cross-border travel, inflation, physical leisure activities) to look forward to. At this moment, I’m just waiting on the side while being on the lookout for the selling to settle down and for more bullish news to settle in. History has shown how rapidly Visa’s stock value can appreciate. Currently, with the world eagerly wanting to recover from this pandemic you can be assured that the Visa bulls will charge right back in.

Until then, I’ll post updates when Visa’s chart begins to show signs of a recovery.

Is Bitcoin recovering?

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Bitcoin / USD Tether daily chart as of 30th Aug 2021.

Bitcoin chart (30th Aug 2021)

Keeping it simple, let’s study the trend and price action of Bitcoin’s daily chart:

Item A: Strong buying rally with low selling volume since 21st July 2021 where majority of daily candles are in the green.

Item B: Rally managed to push above both the downtrend line and USD41k resistance without much resistance.

Item C: It got rejected at the USD50k resistance but with minor selling, and continued to maintain its price action around USD47k – 48k without much volatility.

Item D: Previously, Bitcoin faced heavy rejection at USD50k which then knocked it down to USD30k. At present, it is a much better sign that the price action is hovering just below USD50k. It’s forming an ascending triangle which usually means there’s less selling volume. Bitcoin may be waiting for a surge in buying volume and/or a bullish catalyst before it can break above this resistance. If it does that and the chart maintains above USD50k, the next major resistance to watch out for is at USD59k.

Should you enter now?

As mentioned, the cryptocurrency market still lacks regulation and is seen by some investors as a tool for gambling. With Bitcoin, those who are familiar with its fundamentals and believe in it (due to its history, market cap, and the fact that it isn’t governed by any individual or private entity) invest with the confidence knowing that it will appreciate in value as its market cap grows and its supply becomes more scarce in the future. As always, invest only with capital that you’re able to part away with. Practice good risk management with your money so that you won’t involve much of your emotions.

Right when I’m drafting this post, Bitcoin is around USD49k. It’s better to wait for it to break above the USD50k resistance and have confirmation that there isn’t much selling volume following that moment. If you enter now, you may enjoy a bit more profit shall Bitcoin continue its rally. BUT what if it gets rejected at this USD50k resistance be it from a bearish news or lack of investor confidence? It’s better to get in and ride the wave when Bitcoin shows bullish signals. At least, when you decide to take profits you will be doing it during an upward trend, which is less tricky compared to it moving sideways.

Profit-taking / when to sell

Bullish scenario: The other major resistance levels to watch out for are USD59k and 65k. If Bitcoin approaches these levels, you may take partial profit, withdraw your initial investment (so that you’re investing only with your profit), or take full profit if you’re certain that Bitcoin will dip heavily.

Bearish scenario: If you’ve invested near USD50k and Bitcoin proceeds to dump, you should wait it out if you’re investing for the long-term. Remember to invest only with capital that you can part away with. I discourage short-term trades in cryptocurrency as pump and dumps will happen and are unpredictable. The worst that can happen when you trade short-term is that a dump may trigger your stop-loss, and shortly after that the price pumps upward again without you entering the market. This may cause you to take your trades too personally and emotionally, leading to more reckless trades.

Conclusion

I can’t stress enough that any retail investor should treat Bitcoin as you would gambling. Even in gambling, you should practice strict risk management with your money. The risk in Bitcoin is usually in the pump and dump actions. To overcome this, I highly encourage investing into Bitcoin for the long-term. Again, if you’re familiar with the fundamentals of Bitcoin and studied its 12-year chart, you may have confidence that this cryptocurrency still has plenty of room to grow in value.

Hello, fellow traders!

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About me:

My name’s Lucas. I’m a former restauranteur, a dad to two adorable kids, and the breadwinner of my household. Aside from that, I’m a passionate trader. My journey in trading covers Wall Street stocks and cryptocurrencies. It began in 2017, when my wife tormented me with her nagging so that I would start investing my hard-earned money instead of burning them on things that depreciate over time.

My trading experience:

I began investing into Bitcoin (2017) and some standard Wall Street stocks (2018), while enrolling myself in several courses in investment/trading. I’ve also paid a premium to the market for rookie mistakes I’ve made at the beginning. Now fast forward to 2021, I had to shut down my restaurant due to the impact of the Covid-19 pandemic…but boy, was I thankful that my wife nagged me back in 2017 — the timing couldn’t have been better! The long-term investment I made in Bitcoin and Wall Street paid off handsomely right when I had to call it quits with my restaurant (only source of income). This inspired me to take my investments more seriously, and I then became way more active and disciplined in trading, aiming for consistent profits (and not gambling) which then made this my full-time hobby/job.

Why did I start blogging?

My market experience consists of trades using CFD’s, Options, and non-leverage tools. With consistent profits in mind, I prefer to keep my trade ideas flexible and plan my trades in accordance to what the market is telling me. Again, nobody can get 100% of their trades right, so that’s where each trade needs to be planned carefully with a back-up plan. It’s exciting and strenuous at the same time! And with this blog, I intend to lay out my trade ideas, important market updates, and lessons learned so that I can share them with friends, family, and other like-minded individuals. It’s also a way for me to organize my thoughts and learn from my mistakes and successes. At the end of it all, I hope we can exchange trade ideas, gain valuable knowledge, and — more importantly — make money from the time spent on this blog.

Until then, I hope you find this blog useful. Happy trading, guys!