Bitcoin Buying Panic Leaves A Dangerously Overextended Market

What’s interesting about the nature of markets is just when one side of the battle between buyers and sellers thinks they have it completely won, they are at their most vulnerable.  Bitcoin has gained over 100% since the start of October on top of an over 900% gain for the year 2017.  Since Bitcoin broke out into a Stage 2 advance in 2015 around $250 it is up over 40x.  Intoxicating gains that everyone is captivated by currently and wishes they could go back in time and capture.

The reality though is the best time to buy Bitcoin was back in 2015 and 2016 when few were talking about it and it was emerging out of a Stage 1 base.  Now everyone is talking about it and greed has taken over and the Stage 2 uptrend has gone into a breathtaking parabola.  Earlier today Bitcoin was more than 130% above it’s 30 week MA which is the most overbought it has been since this uptrend began in 2015.  Amazingly this is the third time in the last 6 months the price has stretched more than 100% above the MA, that is exceedingly rare for something with a market cap of over $150 billion.


For comparison purposes when Cisco Systems made its final parabolic move into the first quarter of 2001 during the Internet bubble it had a market cap of around $500 billion and only made it to 50% above its 30-week MA.

QUALCOMM reached a market cap of $100 billion during the same time period which is more similar to Bitcoin but was only able to get 150% above its 30-week MA, which is close to where Bitcoin is currently.

It’s impossible to tell where Bitcoin will top, or even if it does move lower from here, whether this area will be “the top”.  But it’s easy to say Bitcoin is the most overextended since this uptrend began because it is.  And Bitcoin has no price support in the chart  all the way back down to the $3000-$4000 area which is more than a 50% loss from here.

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The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.

Uranium Stocks Reawaken After Cameco Cuts Production

At the end of 2016 and the start of 2017 we saw an explosive breakout in the uranium miners, but that rally flamed out and the uranium market went back into a Stage 1 base.  After that failure from about May of this year until the last couple weeks the uranium miners drifted sideways and volume dried up, signalling disinterest in the sector but a general balance between buyers and sellers.  Recent news out of Cameco cutting 10% of world production in uranium caused a flurry of activity in the uranium miners and the price of uranium.

One of the most bullish aspects of the uranium miners that I haven’t seen discussed anywhere else is the positive divergence between the miners and the price of uranium that continues to this day.  Take a look at the charts of U.TO and URA below and notice how the uranium miners (URA) have put in 3 minor but important higher highs (denoted by the circles on the chart) at the same time the price of uranium (U.TO) was making lower lows.  Often this type of action is seen in market bottoms where further declines in the commodity fail to produce lower lows in the commodity producer.  This means the shares of the commodity producer have shifted into stronger hands, they are no longer willing to sell even if the underlying commodity continues to decline in price.  This is what leads to explosive Stage 2 breakouts because once demand comes back in there is literally no one left to sell, and the stocks start ripping higher.


U.TO took fairly good volume last week doing 3x average weekly volume.  The volume in URA was also over 2x average volume on the previous week.  The bigger the volume on a Stage 2 breakout the better, and if we continue to see increased volume in these over the next few weeks that’s a good sign.

I took initial positions in UEC, URG, and UUUU to play this potential new Stage 2 breakout in the uranium miners.  I’ll be watching the price action as always and using the 30-week moving average as my risk management line and indicator of whether to stay in the trade.

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The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.

Buying Stocks In A Strong Sector That Haven’t Broken Out Yet: Cannabis Edition

Cannabis stocks are on fire after TWMJF led off as the first stock to break out.  A hot sector can provide a lot of trading opportunities.  Instead of chasing the leaders in a sector you can often buy laggard stocks that will get pulled higher by the large amount of money pouring into the sector.  This works especially well with commodity sectors where all companies in a sector essentially produce the same product.

OGRMF and SPRWF are two good examples of this as I fired off a tweet about these stocks earlier today.  I bought them both in anticipation they would follow the leaders in the sector higher.

With both stocks you can see clear resistance and support levels just like the leading cannabis stocks, but they hadn’t broken above resistance yet.  Both stocks had great volume today and OGRMF had a nice consolidation at the high end of the range leading into today’s breakout.

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The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.

Cannabis Stocks Break Out Of A Year Long Consolidation

The three main cannabis stocks that I follow exploded higher on massive volume increases over the past couple of weeks.  Not only that but their recent moves busted them out of a year long consolidation in a very bullish manner.  All three of these stocks were 5 to 6 baggers in 2016, and spent about a year consolidating those massive gains.

Canopy Growth shown below broke out above 10 and has done over 4x average weekly volume the past two weeks.

Aphria is breaking out of the former highs in the 6 to 7 area on over 2.5x average weekly volume the past two weeks.

Aurora Cannabis has had a volume explosion over the past week doing over 5x average volume and breaking out above 2.5.

It’s important to note these stocks are all major Canadian cannabis producers with over a billion dollar market cap.  There are many more speculative cannabis related stocks that are nothing more than management teams with plans and dreams that may or may not turn into anything.

I’m long APHQF and ACBFF as of this writing.  I plan on doing follow up posts on this sector as this appears to be a major breakout that could last a while.

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The original article and much more can be found at: http://www.nextbigtrade.com

The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.

Semiconductor Shares Slammed After Earnings

Many semiconductor stocks have had a rough time after earnings.  AMD, UCTT, FORM, AEIS, and now RTR position NVMI have all been hit.

While NVMI is still in Stage 2 I’ve decided to close out my position in the stock tomorrow.  Fortunately I reduced position sizes in all of my stocks that had upcoming earnings.

This allowed me to take profits in stocks like NVMI and COHU ahead of earnings.  NVMI was up over 20% since I mentioned it in the first RTR.  I’ll take a small loss though on my remaining shares in NVMI unless it moves a little higher tomorrow.

I’m also going to close out COHU and INTT tomorrow.  They both have earnings after the close tomorrow, and based on the way other semiconductor shares have traded I’m not sure its worth the risk holding into earnings.  I have no idea how those stocks will trade after earnings, they could go up or down.  COHU I’ll take a small gain on and INTT I’ll be taking losses on.  INTT hasn’t traded well since it gapped higher and it has closed the gap since then, and it is about to fall below the gap support.

It’s certainly possible these stocks just consolidate and keep moving higher.  But since I have other trades that are working better (DAIO, TEAM, TWTR), I’d rather either add to those positions or find other setups without the overhead resistance that now exists in these semiconductor shares.  TEAM and DAIO especially are turning into monster winners, and TWTR is trading well so far the week after it surged higher.  It’s quite possible we are seeing a rotation out of semiconductor names after earnings which isn’t surprising since they have been performing so well.

Had I not taken any profits on the way up in NVMI I’d have nothing to show for it after holding for a couple months.  Which is another example of why I’m a big fan of taking partial profits off the table when you get them.  All of the positions I take in stocks I trade in increments, if a stock continues to go up I will increase my position size but also take a portion of the profits and reduce position size when I get them.

Checkout my new Stage Analysis Screening Tool at: http://screener.nextbigtrade.com

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Twitter: @nextbigtrade

The original article and much more can be found at: http://www.nextbigtrade.com

The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.