Tag Archives: trading

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.

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!