Category: Investing

Is the Bond Bear Here?

Did we see the top of a 40 year bond bull market last year?
Nearly every one I follow is saying we have seen “The Top”. I have repeatedly warned about jumping on the bearish bandwagon with this market. See here and here. I do not think this time is any different. It is possible this is a good trade on the short side. I certainly hope it is since I am short right now. But I have not seen anything to indicate that the psychology of the market participants has changed. The first sign of trouble with the global economy, we will see traders jump back in on the long side. The first Fed announcement about QE, we will see traders try to front run the Fed. Until I see price action disconnect from these events, I will remain agnostic.

Why I Do Not Trade Bitcoin

Bitcoin is going parabolic again. I have no idea where it will stop this time. Last time I called the top in Bitcoin almost to the day. You can read about it here. I do not sense the same mania phase.  I do not know if most people realize this but there are Bitcoin futures. I have not traded them in some time. I trade on breakouts. Bitcoins breakouts almost complete the pattern the same day.

For instance, on a close above 20K it completed an ascending triangle. The problem for me is that it ran up so far away from the breakout point I could never get a good entry with a good stop in place.
Even on the longer term chart, I seen the head and shoulder pattern forming a few weeks back. I was never able to get a good entry point. The market just runs away.

The volatility is bad enough, but the leverage on this contract is too much. I would never be able to sleep at night.

To enter one contract requires over $49,000. I risk a very small percentage of my trading capital per trade. I know there are other exchanges that sell fractions of bitcoin, but the last thing I need is another account.
There was a time when I thought Bitcoin was going to zero. My thinking has changed over the years. These cryptocurrencies might be around for a while. I have no idea what they are going to be used for other than a speculative vehicle. No one has yet to explain this to me. With price swings like this it will not be used as a currency.

The Discipline of Trading

The human aspect of trading is very important. This is why entire books are written by professional future traders that focus on the human element. A novice trader just wants to know the entry and exit points. If it was that easy, we would all be professional commodity traders.  A successful trader must overcome the human emotions of fear, greed, overconfidence, false hope, etc. Even the euphoria of winning can be dangerous. For instance, I have the following open positions:

Symbol Position Date
Position
Opened		 Price
Position
Opened		 Price
Now		 Per Contract Profit
CAD Long 12/2/20 0.7732 0.7848 $1,160.0
GPB Long 12/16/20 1.3556 1.3551 $0.0
GPL Long 11/23/20 926.4 1054 $11,680.0
JZ Long 12/14/20 0.0096225 0.009691 $887.5
NASDAQ Long 12/13/20 12410.5 12625 $4,295.0
NG Long 4/21/19 2.492 2.643 $1,510.0
NIY Long 11/9/20 25465 26760 $6,475.0
NZD Long 11/11/20 0.688 0.7104 $2,240.0
Total Open Profit $28,247.5

On a per contract basis, the profit is over $28K. When you have open large profits, it encourages you to do stupid things. First, it is tempting to take all of this money and run off. However, some of these trading patterns have a long way to go based on my trading plan. This is where “let profits run” comes into play. Sticking to your plan requires discipline. Second, it encourages to pyramid these winnings and keep adding to them. The risk of becoming over leveraged grows. Suddenly, the market moves against your position and all of your profits vanish into losses.

Horizontal vs Diagonal Breakouts

Horizontal breakouts are much more reliable than diagonal breakouts. This is explainable in how humans think and act. Although I will not get into that here.
I posted here about Apple and Micron. These two will be used as an example.

Apple broke out of its symmetrical triangle. Its target is $140. But notice after the breakout that it just lingers around. This is typical of a symmetrical triangle. Sometimes it goes back into the apex. Other times it just grinds sideways for days.
Now look at Micron.

This is typical action for horizontal breakouts. This is especially true when the breakout is to an all time high or a high not seen in the past year or so. Micron begins to trend right to its target of $90.
When you trade futures you are trading very leveraged markets. Your losses and profits are magnified.
It is psychological torture for me to have the price linger around my entry point. This is a combination of two things. First, I am very impatient. Second, my stops are very tight. I risk very little money per trade. This gets me stopped out when trading diagonal breakouts.

Riding the Platinum Bull


I am adding more longs to the platinum trade. I think it has a lot more upside.
First, the daily charts.

As I expected, it blew right past the 1030 resistance. If it pulls back to the 1030 level, I will add even more longs.
Second, we have the weekly charts.

It just completed a right angled broadening triangle. The target for this pattern is $1400.
Third, we have the monthly charts.

I believe this is the start to a bull market in platinum. I plan to ride this trade into the $1400 level.
I believe platinum is going to ultimately do what palladium did.

I detailed the fundamental case for buying platinum a few years ago. See my posts “A Tale of Two Metals” and “Zimbabwe II“. I will repeat what I said- buying platinum is like buying a put option that never expires on the stupidity of South Africa’s government.
You will never go broke when you bet on the stupidity of governments.

Tesla Target Reached

The target for Tesla has been reached.

I thought this market was going to break out from the triangle to the downside. It never came to be. I still believe Tesla is over valued. It is a mania. The idea that this company is worth a half a trillion dollars does not match with reality.

Anatomy of a Bull Market- Six Flags

Six Flags was one of those stocks I went all in on. I was never a fan of diversification. This is code for “I don’t know what to do”.  The way to make a lot of money is to put all of your eggs in one basket. Of course you need to make sure you are right. I considered Six Flags such a company. I went all in at about $18. However, if you are not into fundamental analysis, the chart was painting the bull run.

I consider the H&S failure pattern the most reliable. It made two shoulders on the left and two shoulders on the right. Perfect symmetry. Once the H&S target was reached, it began to form an ascending/symmetrical triangle.
I am still in this market. I will begin to lighten up at $40.

Tesla Short Trade Setting Up

Tesla shows a symmetrical triangle or an ascending triangle. Three out of four times these are continuation patterns.

However, it looks like this will be a reversal pattern. It touched the resistance three times without busting through. Also, the price seems to go down on shrinking volume. A close below $375 will be very bearish and probably send this stock to the $250 support level.

Six Flags Next Stop

I own a large amount of Six Flags. I got in during the COVID-19 hysteria. It has completed what I consider to be the most reliable patterns. The head and shoulder continuation pattern.

Also note that the 50 day moving average is about to cross the 200 day moving average. Its next stop looks to be $28.