Nvidia and the Midcap BreakoutMegacap growth stocks like Nvidia have outperformed for years. But traders looking for the trend to change may see more evidence of a shift.
Today’s idea considers three charts. The first shows how Nvidia (NVDA) rallied 93 percent this year above its previous record high. It also highlights the big price swing on Friday as the chip giant made a new record high before reversing lower. In the process it engulfed prices over the two previous sessions. That’s a potential reversal pattern, especially considering the heavy volume. Is it a top for now?
We next turn to the SP:MID S&P 400 midcap index, which ended last week above its previous weekly closing high from November 2021. That pattern of higher weekly closes in December anticipated January breakouts in the Nasdaq-100 and S&P 500. Will midcaps follow?
MID is potentially important because it mostly focuses on traditional groups like industrials, retailers and financial services. It roughly tracks “value” stocks.
Speaking of value stocks, the final chart shows a ratio between the SP:SVX S&P 500 Value Index and the Nasdaq-100 on a monthly time frame. Value outperformed as the dotcom bubble deflated, but then growth stocks regained leadership in 2009. However the ratio has stabilized since August 2020.
Finally, the AI trend is about one year old. (It began with the spread of ChatGPT in February 2023 and NVDA’s GTC conference one month later.) Will investors start taking profits on long-term gains? Conditions are also changing as the economy skirts recession and the Federal Reserve prepares for a potential rate cut in June.
In conclusion, traders looking for a rotation away from megacap growth stocks have been frustrated for a long time. But now there could be increasing signs that some rotation has finally begun – at least for the time being.
TradeStation has, for decades, advanced the trading industry, providing access to stocks, options and futures. See our Overview for more.
Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options or futures); therefore, you should not invest or risk money that you cannot afford to lose. Online trading is not suitable for all investors. View the document titled Characteristics and Risks of Standardized Options at www.TradeStation.com . Before trading any asset class, customers must read the relevant risk disclosure statements on www.TradeStation.com . System access and trade placement and execution may be delayed or fail due to market volatility and volume, quote delays, system and software errors, Internet traffic, outages and other factors.
Securities and futures trading is offered to self-directed customers by TradeStation Securities, Inc., a broker-dealer registered with the Securities and Exchange Commission and a futures commission merchant licensed with the Commodity Futures Trading Commission). TradeStation Securities is a member of the Financial Industry Regulatory Authority, the National Futures Association, and a number of exchanges.
TradeStation Securities, Inc. and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., both operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Visit www.TradeStation.com for further important information explaining what this means.
Community ideas
Bitcoin: Failed High Or 80K?Bitcoin first pushes all time highs earlier in the week, followed by a 10K point retrace, only the climb back to the top and push the highs again. Wild price action for sure, but what does this mean in terms of the probability of continuing higher?
The fact that price retraced 10K points in one day is very telling and demonstrates the amount of risk one faces at these levels. It is also impressive that it recovered the 10K points and now flirting with all time highs again. Certainly an argument for strength.
There are two important things to consider here from a technical perspective. You can argue all you want about "halving" and whatever, but I am only interested in probabilities. The question I ask is "what is the probability this continues higher?". To answer that, I look at two technical elements: the wave count and the support/resistance levels.
The fact that 5 waves are complete and there was a sell off attempt tells me this market can sell at a moments notice. 5th waves usually signify that the potential for this move to continue is VERY limited. While anything is possible, I like to lean on the side of probability and 5th waves often precede corrective structures. As we have seen a 10K adverse move is very easy, so what will a legitimate correction look like? The point is the risk is very high on the long side, particularly for investors.
The second factor I am watching is the FAILED HIGH scenario (see arrow on chart). The blue rectangle represents a proportional area where price is HIGHLY likely to reverse. It has reversed once on the smaller time frames in this area. IF a bearish reversal pattern appears in this area AGAIN, it can be the start of the broader pull back. Keep in mind a price probe into this area can push into new highs, getting the herd all excited before turning.
The bullish continuation scenario would be IF prices pushes through the blue rectangle effortlessly and closes above it. That would signify continued strength which could take prices into the mid to high 70Ks. This type of price action is ideal for day and swing trades, while too risky for investing in my opinion.
I am not able to put a hard probability on this situation, but IF you had a clue that there was an 80% chance of retrace and a 20% chance to continue to 80K, which side would you lean on?
Thank you for considering my analysis and perspective.
A Simplified Model for Bubbles. This post is to test a hypothesis we can break bubble moves down into five main stages and with these we can have a reasonable idea where we might be in that move.
Here I've marked up the phases on Cocoa and I'll also show some others that have similar phases.
Broadly understanding the phases of a bubble and crash is not as grandiose a claim as it's made out to be. My idea that bubbles and pops can be understood is based on my opinion that various TA methods do a good job of explaining trend development. When major bubbles and pops of the are viewed in hindsight, they have obvious finger prints of bull/bear trend development.
Trend development models and theories are something we can develop and test trading over smaller timeframes. On 5 minute charts little bubbles and crashes happened daily. On hourly charts they happen weekly. Daily charts you see them over months. If you can test thing to work on these timeframes, it's perfectly valid to scale that to weekly/monthly.
My premise is the overall rules of trend development are not significantly different from the rules of intraday/week/month development.
Through the last years I've tested models I have for bull trend reversals with varying effects. I could tout various instances of forecasting major reversals in 2021/2022 and show a very timely switch to bull in 2023. The models have had many successes. They've also had many misses. I've learned a lot about the limitations of various things.
This is an attempt to combine the original trend development ideas I had with real experience of attempting to establish the major swings in moves over the last years and apply that to some current charts that have people's attention. Charts that as per this bubble template would be in heading into the reversal swings.
First let's expand on the five stages;
Stage one:
During stage one there will be an obvious uptrend. The trend won't be of an exceptional angel but it will be progressively heading higher. It will probably look like it's going up quickly in real time, but when viewed later this was a very slow section of the trend. Lots of pullbacks likely in this phase.
Stage one has an uptrend but it does not have a lot of people believing in it. In fact, what's most common is stage one is people pointing out the reasons the trend is unsustainable.
Stage two :
Stage 2 is a crash section of the move. The bull trend breaks. At this time there are not a lot of calls for dip buying, a more popular tone is "Told you so". People have been expecting the rally to fail and are vindicated. During this time is the best possible time to buy but it'd be a highly unpopular opinion to defend in the public arena.
Stage three:
The doubling. A magnificent trend. It defies doubters time and time again until few people dare to doubt and those who do are subject of mockery. There's been a full shift from those being bullish being the outcasts to those being bearish being the outcasts. By this time the asset in question should be the darling of market related forums.
Note - I've called this the doubling phase but it can be a bit more/less. What's important is it a massive advance of the trend. Which massively changes sentiment.
Stage 4
Stage 4 is a false reversal. Heading into stage 4 it's unpopular to be a bear. Usually by this stage we're seeing people buying the asset with no previous investing background (Or nothing of a speculative nature like this). It not only has public acceptance but it's shrouded in eternal optimism.
Note: It is possible the optimism around the asset in question is long term valid. This does not remove the risk of 70 - 90% drawdowns. A standard part of trend development is to make a first trend leg. Correct almost all of that trend leg. Then head into a far larger and longer trend. An example would be the 1920's rally and crash. Was going higher, late 20's was bad time to buy.
Stage 5
In stage 5 bulls become geniuses and bears become stupid. Stage 5 is where an unshakable belief in the trend is formed by bulls and even the most staunch of bears is having trouble shorting it. If they're not shy about when they're short, they do not have money to short any more. Stage 5 is a tough time to be a bear.
Stage 5 is a really strong spike out. Coming off the stage 4 bear trap it really solidifies the idea this trend can overcome anything. It is the strongest section of the trend. Brief, but aggressive.
NVDA
Maybe the the most loved/hated stock in the world. Lot of strong opinions on NVDA. I personally think AI is cool and AI stocks have a great future. But remember that thing I said about big corrections. Just because something will be awesome in 30 years does not make it a good buy now (Looking at you, Nasdaq 1999!).
Here's the stages.
SMCI
SMCI is tricky because when you look at the rally close up you can see there are 10% drops which could be considered fitting for stage 4. That would imply a top being in now we have the big break candle. However, it's also equally valid to make a case for this being stage 4 and there to be a final spike out.
The model would have SMCI either at a classic bull trap reversal level or due to spike the high before the real turn.
Click below for the case for high being in.
AAPL
Here's the phases in AAPL looking at from inception.
The usefulness of the model (So far) for AAPL can be supported with an accurate forecast of the rally to a new high forming.
All of which would be well explained with Elliot Wave theory.
Here's an example of what happens when all of these phases hit and there is a strong and complete reversal.
Mindfulness : The Zen approach to Trading SuccessMindfulness is a practice that involves being fully present and engaged in the moment, aware of your thoughts and feelings without judgment. It originates from ancient Buddhist meditation practices but has been adopted widely in various forms across the world for its mental health benefits. In this post, we'll dive a bit deeper into what it is, where it comes from, and how it can help you when trading. Some practical tips and where to start are included as well, so keep on reading till the end.
❔ What is mindfulness?
Mindfulness is like having a special tool that helps you pay close attention to what's happening right now, in this very moment, without wishing it was different. It's about noticing the little things - how your breath feels going in and out, the way your body feels sitting or standing, or even the sounds around you. It's all about being fully present and aware, like watching a movie and noticing every detail on the screen without getting distracted by thoughts of what you will do later.
When you practice mindfulness, you're training your brain to focus on the present moment. It's like when you use a magnifying glass to look at something closely; you see a lot more detail than you would if you were glancing at it. Mindfulness works the same way, but instead of looking at something outside, you're paying close attention to your thoughts, feelings, and sensations.
By practicing mindfulness, you learn to respond to situations with more calmness and less knee-jerk reactions. Instead of getting immediately upset or stressed by something, you give yourself a moment to decide how you want to react. It's like pressing a "pause" button, giving you the chance to choose your response.
In simple terms, mindfulness changes your mindset by helping you live more in the "now," handle your emotions better and be kinder to yourself. It's like having a secret garden inside your mind where you can go to find peace, no matter what's happening around you.
❔ Where does it come from?
Mindfulness, originating over 2,500 years ago within Buddhist meditation practices, transcends its ancient spiritual roots to address a universal human need: the desire to be fully present and aware in our lives. This practice, once cultivated in the serene landscapes of ancient India, has evolved beyond its religious confines, finding a place in various Eastern traditions such as Taoism and Zen Buddhism . Each culture enriched the concept, emphasizing awareness, intention, and compassion, and highlighting mindfulness's universal appeal and applicability.
The late 20th century witnessed a significant cultural bridge as mindfulness made its way into the Western world, largely thanks to pioneers like Jon Kabat-Zinn . His approach through the Mindfulness-Based Stress Reduction (MBSR) program at the University of Massachusetts Medical School showcased mindfulness as a powerful tool for psychological well-being, stress reduction, and enhanced quality of life, irrespective of its religious origins. Today, mindfulness is embraced across diverse fields for its profound benefits, embodying a timeless practice that enhances the human experience by promoting a deeper connection with the present moment.
❔ Why Mindfulness for Trading?
Why is mindfulness important for trading? Think of trading like a big room full of buttons. Each button can make you feel something different – happy when you win, sad or scared when you lose. Mindfulness is like having a special guide in this room. This guide helps you walk through without hitting every button by accident. It teaches you to notice the buttons (your feelings) without having to press them all. This way, you can feel happy about the good things and not feel too bad about the not-so-good things, keeping your mind steady no matter what happens.
Mindfulness helps you stay calm and clear-headed. When you're trading, it's easy to get caught up in the excitement or worry a lot. Mindfulness is like putting on a pair of glasses that helps you see everything more clearly. You learn to pay attention to what's happening right now, instead of getting lost in thoughts about what might happen next or what happened before. This can help you make better decisions because you're thinking clearly and not just reacting to your feelings. It's like having a secret weapon that keeps you feeling good and thinking smart, no matter how wild the trading world gets.
❔ How does it help in trading?
Emotional Regulation : Trading can be an emotionally charged activity, with the potential for high stress, anxiety, and strong emotional reactions to wins and losses. Mindfulness helps traders recognize their emotional states without becoming overwhelmed by them, promoting a balanced approach to decision-making.
Improved Focus and Concentration : Mindfulness enhances the ability to concentrate on the task at hand. For traders, this means being able to focus on analyzing markets, monitoring trades, and making decisions without being distracted by irrelevant information or internal chatter.
Reducing Impulsive Behavior : By fostering an increased awareness of thoughts and feelings, mindfulness can help traders avoid impulsive decisions driven by short-term emotions such as fear, greed, or frustration. This can lead to more disciplined and considered trading strategies.
Stress Management : The practice of mindfulness has been shown to reduce stress levels. Given that trading can be a high-stress occupation, particularly during volatile market conditions, mindfulness can help traders manage stress, maintain clarity, and avoid burnout.
Enhancing Decision Making : Mindfulness promotes a state of calm and clarity, allowing traders to evaluate situations more objectively. This can improve decision-making by reducing the likelihood of decisions being clouded by emotions or cognitive biases.
Learning from Mistakes : Mindfulness encourages an attitude of non-judgmental observation. This perspective can help traders view losses or mistakes as learning opportunities rather than personal failures, cultivating a growth mindset that is crucial for long-term success.
Incorporating Mindfulness into Your Trading Routine
Here are a few things you can do to build in mindfulness routines in your trading day.
🧘🏽♀️Daily Meditation : Start with just 5 minutes a day. There's a plethora of apps like Headspace or Calm to guide you.
🤯Setting Intentions : Each morning, remind yourself of your trading goals and how you want to approach the day mindfully.
😤Mindful Breathing : Feeling overwhelmed? Pause and take ten deep breaths to reset your mental state.
⏸️Mindful Pauses : Before you click that trade button, take a moment to ensure this decision feels right in the gut.
✍🏽Reflective Journaling : End your day by jotting down your emotional journey alongside your trades. You might be surprised by the patterns you find.
📚 Get started:
Interested in expanding your mindfulness repertoire? Here are some resources to get you started:
Jon Kabat-Zinn's " Wherever You Go, There You Are " for mindfulness 101. ISBN 978-0-7868-8070-6
The Headspace Guide to Meditation and Mindfulness by Andy Puddicombe for those looking to integrate mindfulness into everyday life. ISBN-10 1250104904
10% Happier for meditation skeptics who want practical insights. ISBN-10 0062265423
✅ Takeaway
Who knew that the path to trading success could involve a bit of Zen? By embracing mindfulness, you're not just becoming a better trader; you're investing in your overall well-being. So, here's to trading mindfully and finding that inner peace amidst the market's chaos. Remember, in the world of trading, the best investment you can make is in yourself.
📣 Join the Conversation!
Now, it's your turn! Have you tried integrating mindfulness into your trading routine? Notice any shifts in your decision-making or emotional resilience? Or maybe you've got some mindfulness tips and tricks of your own to share. Drop your stories, insights, or even your skepticism in the comments below. Let's build a community of mindful traders, learning and growing together. Can't wait to hear about your experience!
Diversification: What It Is, Why It Matters & How to Do ItDiversification is a market strategy that enables you to spread your money across a variety of assets and investments in pursuit of uncorrelated returns, hedging, and risk control.
Table of Contents
What is portfolio diversification?
Brief history of the modern portfolio theory
Why is diversification important?
An example of diversification at work
How to diversify your portfolio
Components of a diversified portfolio
Build wealth through diversification
Diversification vs concentration
Summary
📍 What is portfolio diversification?
Portfolio diversification is the strategy of spreading your money across diverse investments in order to mitigate risk, hedge and balance your exposure in pursuit of uncorrelated returns. While it may sound complex at first, portfolio diversification could be your greatest strength when you set out to trade and invest in the financial markets.
As a matter of fact, once you immerse yourself into the markets, you will be overwhelmed by the wide horizons waiting for you. That’s when you’ll need to know about diversification.
There are thousands of stocks available for trading, dozens of indices, and a sea of cryptocurrencies. Choosing your investments will invariably lead to relying on diversification in order to protect and grow your money.
Diversifying well will enable you to go into different sectors, markets and asset classes. Together, all of these will build up your diversified portfolio.
📍 Brief history of the modern portfolio theory
“ Diversification is both observed and sensible; a rule of behavior which does not imply the superiority of diversification must be rejected both as a hypothesis and as a maxim. ” These are the words of the father of the modern portfolio theory, Harry Markowitz.
His paper on diversification called “Portfolio Selection” was published in The Journal of Finance in 1952. The theory, which helped Mr. Markowitz win a Nobel prize in 1990, posits that a rational investor should aim to maximize their returns relative to risk.
The most significant feature from the modern portfolio theory was the discovery that you can reduce volatility without sacrificing returns. In other words, Mr. Markowitz argued that a well-diverse portfolio would still hold volatile assets. But relative to each other, their volatility would balance out because they all comprise one portfolio.
Therefore, the volatility of a single asset, Mr. Markowitz discovered, is not as significant as the contribution it makes to the volatility of the entire portfolio.
Let’s dive in and see how this works.
📍 Why is diversification important?
Diversification is important for any trader and investor because it builds out a mix of assets working together to yield returns. In practice, all assets contained in your portfolio will play a role in shaping the total performance of your portfolio.
However, these same assets out there in the market may or may not be correlated. The interrelationship of those assets within your portfolio is what will allow you to reduce your overall risk profile.
With this in mind, the total return of your investments will depend on the performance of all assets in your portfolio. Let’s give an example.
📍 An example of diversification at work
Say you want to own two different stocks, Apple (ticker: AAPL ) and Coca-Cola (ticker: KO ). In order to easily track your performance, you invest an equal amount of funds into each one—$500.
While you expect to reap handsome profits from both investments, Coca-Cola happens to deliver a disappointing earnings report and shares go down 5%. Your investment is now worth $475, provided no leverage is used.
Apple, on the other hand, posts a blowout report for the last quarter and its stock soars 10%. This move would propel your investment to a valuation of $550 thanks to $50 added as profits.
So, how does your portfolio look now? In total, your investment of $1000 is now $1,025, or a gain of 2.5% to your capital. You have taken a loss in Coca-Cola but your profit in Apple has compensated for it.
The more assets you add to your portfolio, the more complex the correlation would be between them. In practice, you could be diversifying to infinity. But beyond a certain point, diversification would be more likely to water down your portfolio instead of helping you get more returns.
📍 How to diversify your portfolio
The way to diversify your portfolio is to add a variety of different assets from different markets and see how they perform relative to one another. A single asset in your portfolio would mean that you rely on it entirely and how it performs will define your total investment result.
If you diversify, however, you will have a broader exposure to financial markets and ultimately enjoy more probabilities for winning trades, increased returns and decreased overall risks.
You can optimize your asset choices by going into different asset classes. Let’s check some of the most popular ones.
📍 Components of a diversified portfolio
Stocks
A great way to add diversification to your portfolio is to include world stocks , also called equities. You can look virtually anywhere—US stocks such as technology giants , the world’s biggest car manufacturers , and even Reddit’s favorite meme darlings .
Stock selection is among the most difficult and demanding tasks in trading and investing. But if you do it well, you will reap hefty profits.
Every stock sector is fashionable in different times. Your job as an investor (or day trader) is to analyze market sentiment and increase your probabilities of being in the right stock at the right time.
Currencies
The forex market , short for foreign exchange, is the market for currency pairs floating against each other. Trading currencies and having them sit in your portfolio is another way to add diversification to your market exposure.
Forex is the world’s biggest marketplace with more than $7.5 trillion in daily volume traded between participants.
Unlike stock markets that have specific trading hours, the forex market operates 24 hours a day, five days a week. Continuous trading allows for more opportunities for price fluctuations as events occurring in different time zones can impact currency values at any given moment.
Cryptocurrencies
A relatively new (but booming) market, the cryptocurrency space is quickly gaining traction. As digital assets become increasingly more mainstream, newcomers enter the space and the Big Dogs on Wall Street join too , improving the odds of growth and adoption.
Adding crypto assets to your portfolio is a great way to diversify and shoot for long-term returns. There’s incentive in there for day traders as well. Crypto coins are notorious for their aggressive swings even on a daily basis. It’s not unusual for a crypto asset to skyrocket 20% or even double in size in a matter of hours.
But that inherent volatility holds sharpened risks, so make sure to always do your research before you decide to YOLO in any particular token.
Commodities
Commodities, the likes of gold ( XAU/USD ) and silver ( XAG/USD ) bring technicolor to any portfolio in need of diversification. Unlike traditional stocks, commodities provide a hedge against inflation as their values tend to rise with increasing prices.
Commodities exhibit low correlation with other asset classes, too, thereby enhancing portfolio diversification and reducing overall risk.
Incorporating commodities into a diversified portfolio can help mitigate risk, enhance returns, and preserve purchasing power in the face of inflationary pressures, geopolitical uncertainty and other macroeconomic risks.
ETFs
ETFs , short for exchange-traded funds, are investment vehicles which offer a convenient and cost-effective way to gain exposure to a number of assets all packaged in the same instrument. These funds pull a bunch of similar stocks, commodities and—more recently— crypto assets , into the same bundle and launch it out there in the public markets. Owning an ETF means owning everything inside it, or whatever it’s made of.
ETFs typically have lower expense ratios compared to mutual funds, making them affordable investment options.
Whether you seek broad market exposure, niche sectors, or thematic investing opportunities, ETFs are a convenient way to build a diversified portfolio tailored to your investment objectives and risk preferences.
Bonds
Bonds are fixed-income investments available through various issuers with the most common one being the US government. Bonds are a fairly complex financial product but at the same time are considered a no-brainer for investors pursuing the path of least risk.
Bonds have different rates of creditworthiness and maturity terms, allowing investors to pick what fits their style best. Bonds with longer maturity—10 to 30 years—generally offer a better yield than short-term bonds.
Government bonds offer stability and low risk because they’re backed by the government and the risk of bankruptcy is low.
Cash
Cash may seem like a strange allocation asset but it’s actually a relatively safe bet when it comes to managing your own money. Sitting in cash is among the best things you can do when stocks are falling and valuations are coming down to earth.
And vice versa—when you have cash on-hand, you can be ready to scoop up attractive shares when they’ve bottomed out and are ready to fire up again (if only it was that easy, right?).
Finally, cash on its own is a risk-free investment in a high interest-rate environment. If you shove it into a high-yield savings account, you can easily generate passive income (yield) and withdraw if you need cash quickly.
📍 Build wealth through diversification
In the current context of market events, elevated interest rates and looming uncertainty, you need to be careful in your market approach. To this end, many experts advise that the best strategy you could go with in order to build wealth is to have a well-diversified portfolio.
“ Diversifying well is the most important thing you need to do in order to invest well ,” says Ray Dalio , founder of the world’s biggest hedge fund Bridgewater Associates.
“ This is true because 1) in the markets, that which is unknown is much greater than that which can be known (relative to what is already discounted in the markets), and 2) diversification can improve your expected return-to-risk ratio by more than anything else you can do. ”
📍 Diversification vs concentration
The opposite of portfolio diversification is portfolio concentration. Think about diversification as “ don’t put your eggs in one basket. ” Concentration, on the flip side, is “ put all your eggs in one basket, and watch it carefully. ”
In practice, concentration is focusing your investment into a single financial asset. Or having a few large bets that would assume higher risk but higher, or quicker, return.
While diversification is a recommended investment strategy for all seasons, concentration comes with bigger risks and is not always the right approach. Still, at times when you have a high conviction on a trade and have thoroughly analyzed the market, you may decide to bet heavily, thus concentrating your investment.
However, you need to be careful with concentrated bets as they can turn against your portfolio and wreck it if you’re overexposed and underprepared. Diversification, however, promises to cushion your overall risk by a carefully balanced approach to various financial assets.
📍 Summary
A diversified portfolio is essentially your best bet for coordinated and sustainable returns over the long term. Choosing a mix of various types of investments, such as stocks, ETFs, currencies, and crypto assets, would spread your exposure and provide different avenues for growth potential. Not only that, but it would also protect you from outsized risks, sudden economic shocks, or unforeseen events.
While you decrease your risk tolerance, you raise your probability of having winning positions. Regardless of your style and approach to markets, diversifying well will increase your chances of being right. You can be a trader and bet on currencies and gold for the short term. Or you can be an investor and allocate funds to stocks and crypto assets for years ahead.
Potential sources of diversification are everywhere in the financial markets. Ultimately, diversifying gives you thousands of opportunities to balance your portfolio and position yourself for risk-adjusted returns.
🙋🏾♂️ FAQ
❔ What is portfolio diversification?
► Portfolio diversification is the strategy of spreading your money across diverse investments in order to mitigate risk, hedge and balance your exposure in pursuit of uncorrelated returns.
❔ Why is diversification important?
► Diversification is important for any trader and investor because it creates a mix of assets working together to yield high, uncorrelated returns.
❔ How to diversify your portfolio?
► The way to diversify your portfolio is to add a variety of different assets and see how they perform relative to one another. If you diversify, you will have a broader exposure to financial markets and ultimately enjoy more probabilities for winning trades, increased returns, and decreased overall risks.
Do you diversify? What is your strategy? Do you rebalance? Let us know in the comments.
Liked this article? Give it a boost 🚀 and don't forget to follow us if you want to be among the first to be informed.
XRP: Bull Market VibesXRP, like many other cryptocurrencies, has experienced significant fluctuations over the past few years. In this article, we will analyze XRP's behavior from 2018 to the present, focusing on the bull market that started in December 2020.
Descending Channel (2018-2020)
From the summer of 2018 to December 2020, XRP was in a descending channel. This period was characterized by low volatility and a gradual decrease in price.
Sharp Pump and Bull Market (December 2020 - May 2022)
In December 2020, XRP surged sharply, breaking out of the descending channel. This pamp marked the beginning of a bull market that lasted until May 2022.
Ascending Channel (May 2022 - Present)
Since May 2022, XRP has been trading in an ascending channel. This channel is characterized by clear support and resistance lines, as well as XRP constantly testing the upper channel boundary.
Pump Expectation
On the daily timeframe, XRP shows a decrease in volatility. This pattern often precedes a sharp rise in price, so it can be expected that XRP is about to make a new pamp.
Bullish Sentiment Confirmation:
XRP has been holding in an ascending channel for 7 months, without breaking the support line.
The price is constantly testing the upper boundary of the channel, which indicates the bulls' pressure.
Decreased volatility on the daily timeframe is a typical pattern before a pamp.
Important Caveats:
It is important to conduct your own research and assess the risks before investing
TradingView Screener Update - Now with CHART views !!!This has to be one of the best updates on TradingView in a while - certainly from my perspective.
The TradingView Screener was what initially brought me to using TradingView to be able to quickly and easily filter thousands of stocks down to just the handful that met my criteria and that I wanted to research further to look at investing in.
If you have ever had to rely on signal services or other people to tell you what and when to buy and sell, I would STRONGLY recommend you spend some time on the screener.
No matter how you like to trade - technicals, fundamentals, indicators, price action, RSI, MACD, volume etc etc, the TradingView Screener can quickly help you narrow down any stocks that meet your criteria.
Well worth exploring.
Great update by the team!
Bitcoin is still behaving like a risk assetAfter reaching a new all-time high yesterday, Bitcoin underwent a mini flash crash, erasing more than 14% in less than five hours and falling below $60,000. Nevertheless, it took only a few more hours for Bitcoin to recover and get back above the $66,000 handle, where it currently trades. The number of Bitcoin addresses with balances exceeding 1,000 BTC slightly increased, while those with balances exceeding 100 BTC dropped by a small margin. In our opinion, yesterday’s price action is a prime example of Bitcoin remaining a risk asset rather than a safe haven that many people consider it to be. Consequently, we remain highly vigilant in this euphoric state of the market.
Illustration 1.01
The image above shows the 1-minute chart of BTCUSD and yesterday’s mini crash.
Technical analysis gauge
Daily time frame = Bullish
Weekly time frame = Bullish
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of multiple indicators.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.
What Are Cryptocurrency Bear and Bull Traps?What Are Cryptocurrency Bear and Bull Traps?
In volatile crypto markets, traders must contend with many challenges. One of the most common is the bear and bull trap, which can quickly catch traders off-guard if they aren’t careful. In this FXOpen article, we’ll explore how these traps work, provide examples to illustrate their characteristics, and tell about practical ways to avoid them.
What Is a Bear Trap in Crypto?
In cryptocurrency trading, a bear trap is a signal indicating that a crypto asset is declining, luring in short sellers to position themselves for a price drop. However, this signal is false; after reaching a new low, the asset rebounds sharply. On a chart, this may look like a breakout below a support level, then a quick reversal, usually leaving a long wick.
The term ‘bear trap’ comes from the way it ‘traps’ bearish traders. They are almost instantly at a loss and psychologically vulnerable – they have to either realise a loss or risk further losses by holding their position.
Typically, covering these shorts (i.e. closing the short by buying back the position) fuels the bear trap, driving prices higher as traders rush to get out of the market to avoid further pain. It’s also worth noting that long traders expecting the reversal are also often stopped out during a bear trap – after all, it’s commonly repeated advice to set stop-losses beyond a support or resistance level.
It's essential to understand that bear traps are primarily psychological. They often occur when market sentiment is overwhelmingly negative, with traders expecting further price decreases. Institutional players in the market use this negativity to their advantage. They take long positions and briefly push prices down to trap many short traders and trigger long stop-losses. When shorts begin covering, and other traders start to buy, prices rise and put these players in profit.
Example
In the example above, we see Bitcoin dropping heavily on the left, continuing a larger downtrend off-screen. Price finds a bottom, creating an area of support that is held throughout the day. It’s reasonable to expect lower prices, given that BTC has been in a long downtrend.
As a result, when the price begins to break down with a sizable candle, breakout traders begin entering short positions. Those who took a long position, anticipating a broader trend reversal, are stopped out.
When the price begins to reverse as buying pressure picks up, short traders are trapped, likely at a small loss; stopped-out long traders are looking for a re-entry. As shorts began closing their positions and long traders rushed to enter again, Bitcoin surged higher.
What Is a Bull Trap in Crypto?
A bull trap is effectively the opposite of a bear trap: prices rise, encouraging traders to buy a cryptocurrency. It makes a new high and shortly reverses, putting traders who bought the breakout at a loss. This is the primary difference between a bull trap vs a bear trap.
Likewise, bull traps are all about emotion. Bulls are trapped, realising that they will likely take a loss. Bears that are correct in predicting an impending downtrend are stopped out and look for another entry. The fear and frustration of both types of traders add selling pressure to the market, driving prices lower.
Example
In the chart above, Bitcoin drops after an extended uptrend off-screen. It forms a low, retraces, and reacts at an area of resistance. Price continues higher, breaking through the resistance and forming a long wick. Traders buying the breakout see their position move to a loss as the long wick forms, while many short traders’ stops are triggered.
As it moves lower, a bear trap on the lower timeframe forces prices higher once more to form the real bull trap. Breakout traders think it’s for real this time as the high is broken and open long positions, while some short traders that found a reentry are stopped out again. When the price begins to decline sharply, the realisation of the market’s true direction forces the price even lower as traders pile in short.
This example is interesting in that it demonstrates that bull traps can occur repeatedly in the same area. While we won’t cover it in this article, learning the Wyckoff methodology can help you deal with and understand why you may see multiple bear and bull traps in a given area.
Want to mark up charts like we’ve done here? Head over to FXOpen’s free TickTrader platform, where you’ll find each of the tools used to create the examples in this article.
How to Avoid Bear and Bull Traps
It can be tricky to avoid falling into bear and bull traps in crypto, meaning traders should take precautionary steps to prevent frustration and potential losses. Here are four ways that may help traders sidestep these traps.
Understand Where Liquidity Lies
Bear and bull traps serve two purposes: to play on the emotions of traders and to tap into liquidity. Liquidity allows traders to take large positions without significantly affecting an asset’s price, reducing slippage/transaction costs. The deepest areas of liquidity are often found just beyond support or resistance levels, where stop losses are placed, and breakout traders are waiting and are usually tapped into before a considerable move occurs (as seen in the examples).
Liquidity builds up in areas with roughly equal highs and lows, along seemingly-strong trendlines, and at round numbers (e.g. $24,000), but is also present beyond every key high and low. In setups where the obvious place to set a stop-loss is one of these areas, you can consider using a wider stop-loss. Beyond the next significant support/resistance level is a good place to start.
Trade With the Trend
The phrase 'trend is your friend' is popular among traders for a reason. More often than not, these traps push the price in the direction of the broader trend. Understanding this can help avoid such traps. If the broader market trend is clearly bearish, for example, traders might want to reconsider taking a long position based on a potential breakout. Similarly, if the trend is bullish, it might be wiser to hold off on initiating short positions. This doesn't mean that counter-trend opportunities should be completely ignored, but rather that they should be approached with caution.
Check Volume
Trading volume often provides valuable clues about market activity. A sudden price movement accompanied by high trading volume can indicate a genuine breakout, while low volume may suggest a trap. This isn’t always the case since bear and bull traps can generate significant volume themselves, so it’s worth comparing a recent breakout’s volume with a potential trap’s volume to gauge strength.
RSI Divergences
Lastly, traders can use the relative strength index (RSI), a popular momentum indicator, to find early warning signs of reversals where traps often occur. Divergences between the RSI and price suggest weakening momentum and the possibility of a bull/bear trap. For instance, if the price reaches a new high but RSI does not, a reversal could be due. Conversely, if the price makes a new low without the RSI confirming, it could be a sign of a potential bull trap.
The Bottom Line
In conclusion, bear and bull traps are just one of the many challenges traders face when navigating the crypto markets. Understanding how they work and how to avoid them can significantly reduce the losses a trader takes and may even present opportunities for profit if taken advantage of correctly.
In fact, these traps occur across all types of markets, not just crypto. If you want to put your newfound knowledge to the test across over 600 stock, forex, and commodities markets, you can open an FXOpen account. You’ll be able to take advantage of the advanced TickTrader platform, low-cost trading, and blazing-fast execution speeds. Good luck!
At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
High Volume Times to Trade / Part 1 🔣Hello traders welcome back to another Concept video. In this video, we detail some of the best times to trade the Eur/Usd Currency pair. This happens to be at Session opens. We go through the 3 Session opens and walkthrough examples of increasing volume ( Large candles). Session opens can provide a great catalyst for 1) a continuation of momentum of the preceding trend or 2) a dramatic reversal. The Euro and the U.S. Dollar are not open during the Asian session and so the candles are much smaller and the average volatility is much less. However, the same concept applies regarding the former.
Where will the liquidity go next ?Liquidity is shifting within the market, moving from niche to niche as presented in the accompanying chart. One standout winner in this regard is the meme domain , which has seen significant gains because its market capitalization is small. Another area of focus is the AI niche , which is currently experiencing a surge in investor interest and capturing a considerable portion of the liquidity.
Coins with their own independent ecosystems are also drawing in more investors, thanks to their relative liquidity and robust ecosystems. This trend is expected to continue, albeit with some patience required as the market adjusts.
However, it's essential to recognize that liquidity will also flow into other niches within the cryptocurrency space. It's crucial to approach these opportunities with caution, as not all coins or tokens will attract the same level of attention from investors . Simply being invested in a particular coin, even at a lower price, does not guarantee massive returns. Achieving extraordinary gains, such as a 10x increase in value, can be challenging in many domains and niches within the cryptocurrency market.
Additionally, as larger institutional investors enter the cryptocurrency market, the potential gains may become more limited for individual investors. While a 10% profit may be significant for an investor with a capital of $1 million, it may not hold the same weight for someone with only $10,000 to invest.
Happy selling !
The TradingView Digest - March 5thHey everyone! Welcome back to the TradingView Weekly Digest. In today’s edition, we’re highlighting the top posts from our community, which includes a video tutorial on “The Leap” - our first ever paper trading competition, an informative post about Nvidia’s euphoric rise, and all the latest headlines, earnings, and economic events.
💡🎥 The Leap - Win up to $10,000 - by TradingView/
We’re spinning up the first-of-its-kind trading competition and you’re all welcome to join! Traders, speculators, active investors and even the FX gurus on Instagram and the “live like me” trading influencers — this one’s for you all. Show us what you’re made of in our first-ever paper trading competition, The Leap. The Top 5 get to walk away with real cash. From first to fifth, prizes are as follows: $10,000, $5,000, $3,000, $2,000 and $1,000.
💡🎥 Why Central Banks are Buying Gold - by konhow
While many of us celebrate the stock markets reaching new highs, central banks worldwide are actively purchasing gold and institutions are hedging into treasuries to secure yields. It's important to note that interest rates are determined by central banks, while yields are determined by investors.
📰 Top Stories
Elon Musk vs. Everyone: The New Fight in AI
How the U.S. economy could slide into a Japan-like 'lost decade'
Nvidia Stock Soars on Meta AI Deal
Lockheed Martin Gets $663.1 Million Contract Modification from U.S. Department of Defense
Breaking: BlackRock Bitcoin ETF Overtakes the Largest Silver Trust with MUN:10B AuM
💵 Earnings highlights from the previous week:
Dell Stock Pops 20% on Earnings Beat, Strong Guidance & Hot AI Servers Demand
Tidewater Q4 Earnings, Revenue Rise; Full-Year Revenue Guidance Reiterated
MasTec Q4 Adjusted Earnings Fall, Revenue Rises
Pactiv Evergreen Q4 Adjusted EPS Increases, Revenue Drops
FuboTV Reports Q4 Loss, Tops Revenue Estimates
💡 Nvidia’s Formidable Rise - by TradingView
Intense demand for Nvidia's AI chips increased the company's value to $2 trillion, with half of this growth occurring in less than four months. This demand significantly boosted Nvidia's stock price, making it one of the top three largest companies in America, right behind Apple and Microsoft.
💡 How to Trade Gaps - by ShaneBlankenship
There are several ways to trade gaps, but first, there should be a solid understanding of what gaps are and how they manifest. Markets aren't difficult to read if we have some simple methods to observe them that adhere to the principles of movement. A gap is the sudden supply/demand imbalance that arises from contraction and manifests as expansion.
🌟 Script of the Week
📜 Daily Chess Puzzles - by Lux Algo
This script delivers a new one-move chess puzzle to the chart every day.
💭 Our Weekly Thought:
“Not being stressed from a loss is the real flex.”
We hope you found this helpful. Please share your feedback, comments, or suggestions with us in the comments below.
TradingView Team
📣 Want to be among the first to know all the news? Give us a follow!
Gold- New ATH this month? Analysis and SpeculationsI've written many posts and made videos expressing my belief that XauUsd will reach a new all-time high (ATH) this year.
Now, the question is, will it start with all-time highs this month?
In my opinion, it will.
But let's begin with why I'm quite certain that Gold will reach an ATH this year. It's relatively straightforward when you examine the monthly chart.
You don't need to be a technical analyst to see that the trend is clearly upward.
We witnessed a major false break to the downside at the end of 2022, and since then, despite normal corrections, the price has consistently made higher lows.
The monthly candle that just started broke above the technical resistance from 2070.
Of course, anything is possible, but in my view, the chances of a long-term reversal are pretty low now. To clarify, I'm referring to a reversal in the long term, not just corrections.
Now, regarding the next all-time high this month, I'll speculate a bit.
Looking at the same monthly chart, the reversal from November 2022 had 1600 pips, representing a rise of 10%, the second reversal from March 2023 had 2000 pips, which represents 11%, and the third and last monthly reversal candle had 1900 pips, which is also 11%.
So, we can speculate that this month's candle will also rise by around 10%.
Calculating this at the current price, we have around 2000 pips. With the month starting at 2040, we reach 2240.
Moreover, if we consider that the reversal actually started at the bottom of last month's Pin Bar, which is at 1980, and add 2000 pips, we also arrive at 2180, which is also an ATH.
In conclusion, while I don't have a crystal ball, I expect an ATH this month.
However, more importantly, I WILL NOT SELL INTO THIS RALLY, ONLY BUY ON DIPS.
Best of luck!
Mihai Iacob
Why Central Banks Buying Gold & Institutions Hedging the Yields?While many of us celebrate the stock markets reaching new highs, central banks worldwide are actively purchasing gold, and institutions are hedging into treasuries and yields.
Interest rates are determined by the central banks whereas Yields are determined by the investors.
If you choose to lend or borrow money over a longer period, such as 10 or 30 years, you would typically expect to earn or pay more interest for this extended duration loan contract. However, currently, we are witnessing an inversion of this relationship, known as the inverted yield curve, where borrowers are required to pay higher interest on their short-term loans, such as the 2-year yield we're observing, compared to their longer-term borrowing.
2 Year Yield Futures
Ticker: 2YY
Minimum fluctuation:
0.001 Index points (1/10th basis point per annum) = $1.00
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
If Seize the Day was a Company: Nvidia’s Formidable RiseUnhinged demand for Nvidia’s AI chips bumped the company’s valuation to $2 trillion, adding half of that in less than four months. Read how it happened.
Table of Contents
Genesis
Compiling
Speedrun
Benchmark
Spillover
Overclock Much?
Rage Quit
More Players Exit
Wild Rivals Appeared!
Runtime
Genesis
It’s a crisp, sunny morning in 1993. You’re at your local diner in Silicon Valley, casually sipping your coffee and waiting for your meal. At the table next to you, three engineers are cranking on caffeine and dreaming up a gig that would end up changing not only their lives, but also usher in a new era of computing. It’s the three founders of a company called Nvidia (ticker: NVDA ).
A business-savvy 30-year-old Oregon graduate Jensen Huang, hardware savant Chris Malachowsky and software geek Curtis Priem spun up the business more than 30 years ago. Together, they set up their venture in a bid to bring 3D graphics to the gaming space.
Compiling
Today, the thriving company is doing much more than that. Nvidia, which traces its humble origins back to a Denny’s diner, is now the backbone of the artificial intelligence revolution.
Nvidia was for a long time shoved into the deeper corners of the gaming space and was barely known to the public. For most of its existence, it’s been making graphics cards, which are used by gamers, crypto miners, plain PC users and professionals from various industries.
The company’s booming business line right now is AI chips—hardware pieces essential for training large language models, the type that underpins systems like OpenAI’s ChatGPT.
AI chips have also underpinned another side of Nvidia—they’ve touched off a monster rally in its share price. Enough to catapult its valuation to the Top 3 of America’s biggest companies , right after iPhone maker Apple and software heavyweight Microsoft.
Speedrun
It took just about 24 years for Nvidia to step into the exclusive $1 trillion club, having started trading as a public company in 1999 at a $625 million valuation. Then in the span of just four months—November 2023 through February 2024—Nvidia added its second trillion, largely thanks to its timely expansion from its flagship products to the powerful AI chips.
Now, Nvidia is comfortably sitting in the Top 5 of the world’s largest companies .
“A whole new industry is being formed, and that’s driving our growth,” chief executive Jensen Huang told shareholders right after the company published jaw-dropping 265% revenue growth for the final quarter of 2023. The chip darling picked up $22.1 billion in sales, up from $6.05 billion a year ago. Profits swell to more than $12 billion.
Source: Stock Analysis
Benchmark
The earnings release fueled a never-before-seen $277-billion boost to the chip maker's valuation. It was the biggest one-day gain in history of the stock market, surpassing Meta’s recent $204.5 billion pump .
On the second day after the December-quarter financials were published, Nvidia went on to soar above $2 trillion in value with shares changing hands at more than $800 a pop.
Not only that, but the AI trailblazer’s report jolted markets so much it set off a buying spree on a global scale.
Spillover
In the US, the broad-based S&P 500 index notched an all-time high, joined in record territory by the Dow Jones Industrial Average. In Japan, the diverse Nikkei index broke out to a fresh record after 34 years of languishing performance.
Nvidia’s magnificent rise has propelled Huang’s personal fortune to roughly $70 billion, a reflection of his 86.6 million shares, or 3.6% of the company. Is it time for an attire upgrade away from the black leather jacket?
Shares of the company more than tripled in 2023 and pumped over 60% for the first two months of 2024.
Jensen Huang wearing his signature leather jacket—an outfit picked by his wife and daughter. Source: nvidianews.nvidia.com
Overclock Much?
The fundamentals behind the company’s breakneck growth are undoubtedly real. Demand for Nvidia’s most advanced GPUs, called H100s, is so big the chips are being delivered in armored trucks. Each one of them weighs about 290 lbs (130 kg) and will set you back about $30,000 if you’re lucky to get one.
With that said, supply isn’t too loose with Nvidia holding about 80% of that market. What’s more, a new, more powerful H200 chip will be hitting the market in the second quarter of this year.
So what does this mean for the unstoppable rally? Analysts are quick to say that as long as Nvidia maintains its tight grip over supply, outweighing demand should continue to drive the up-only narrative.
Presently, Nvidia has the capacity to develop about 1.2 million AI-focused chips a year, far insufficient to meet the insatiable demand. To illustrate, Meta chief executive Mark Zuckerberg popped on Instagram to brag about his plans of securing 350,000 units of that good H100 stuff by the end of 2024.
Besides the Facebook parent, Nvidia’s biggest customers are Microsoft, Google and ChatGPT owner OpenAI.
Rage Quit
The stampede by investors rushing to buy up stock wouldn’t be complete if it weren’t for the naysayers and doom-and-gloom forecasters. You’d be surprised to see who is on that list of permabears, slamming the chip maker and getting their short positions ready to fire. Or already fired.
Following Nvidia’s post-earnings explosion, short sellers were left nursing paper losses in excess of $3 billion. Staring at giant drawdowns might sting just as badly as missing out the ride.
Disruptive-tech investor Cathie Wood, CEO of investment firm ARK, said in 2023 that Nvidia was “ priced ahead of the curve .” By the end of the year, Wood had offloaded a stake worth more than $100 million. Estimations point that this early leave may be equal to more than $500 million in missed-out profits.
There are other notable names in the investment space who got rid of—or heavily trimmed—their Nvidia shares by the end of last year. (Hedge funds and other investment managers who oversee at least $100 million are required to disclose their holdings in public companies each quarter through a form called 13F.)
More Players Exit
In its 13F filing with the Securities and Exchange Commission, George Soros’s family office Soros Capital had completely exited Nvidia in the third quarter, selling shares worth $4.9 million.
Billionaire Stanley Druckenmiller’s family office held 875,000 shares of Nvidia going into 2023’s third quarter. By the end of the fourth quarter, that hefty stash had been reduced by roughly 40%. Druckenmiller still owns some $300 million in Nvidia shares and even scooped up call options with a notional value of $242 million.
The sellers’ argument wraps around the heavily cyclical nature of chip demand. While in good times there’s euphoria and chip companies triumph, they could also be prone to setbacks once the tide turns.
A fresh example from Nvidia’s recent performance is the 60% drop in its share price in the time span April through September 2022.
Nvidia's share price endured a 60% drop between April and September 2022.
Wild Rivals Appeared!
Competitors from the hardware corner of the economy don’t sit idle while Nvidia goes on an all-out expansion mission. Advanced Micro Devices (ticker: AMD ) is already selling chips similar to the H100s and projects revenue to land at $3.5 billion in 2024. If that number is met, or even doubles, it still will be a blip compared with Nvidia’s $100 billion full-year revenue Wall Street expects.
SoftBank-backed Arm Holdings (ticker: ARM ), whose stock is just as volatile , is in the AI race too. So is Intel (ticker: INTC ) — the US tech mainstay makes and sells chips that power generative AI software.
Nvidia, meanwhile, is busy taking steps to try and cement its dominance in the AI space. It’s already in talks with big tech giants such as Microsoft, Amazon and Google over developing custom chips. Meanwhile, all three are manufacturing their own chips.
Runtime
The big question lingering on everyone’s mind is when will that dizzying AI boom come to a halt or at least pause for breath? Nvidia’s formidable rally, fueled by the rush for graphics processors, is the very definition of what seizing the day means. What’s a reason that may extend this run?
One reason is that the company keeps adding blockbuster earnings quarter in and quarter out.
A second one—Nvidia will need to find a way to work together with tech giants seeking to cut into the AI business. And thirdly, all that effort should eventually pay off by laying out the infrastructure that will foster the much-anticipated AI-driven productivity gain.
SasanSeifi 💁♂Potential for Significant Growth in the Long TermAs you can see in the chart, the price of CAKE has experienced significant growth after a period of decline and volatility. The price bounced back from the $1 support zone and has since experienced another minor increase after a pullback to the $2.50 demand level. The price is currently trading at $3.20.
By examining the behavior of candles in the long-term time frame, we can expect the following for the future of this currency:
If the $2.50 price range is maintained, we can expect further growth to the $4.50/5 liquidity zone and a new high above $4 (HIGH).
The above image shows the possible long-term trend of CAKE and the desired targets. This trend indicates the significant growth potential of this currency in the long term.
The important support zones are $2.50 and $1.70.
This is not financial advice. Always do your research before making any investment decisions.
Sure, if you have any more questions or need further clarification, feel free to ask. I'm here to help!✌
if you found my analysis helpful, I would appreciate it if you could show your support by liking and commenting. Thank you!🙌
XAUUSD:29/2 Today’s Analysis and StrategyOn Thursday, the U.S. dollar index gave up yesterday's gains at 103.93, but bulls continued to put pressure on gold ahead of the release of Personal Consumption Expenditures (PCE), and gold prices have yet to break out of range trading. The dovish Federal Reserve released a timetable for interest rate cuts, suggesting that interest rate cuts will begin in the second half of the year. The U.S. slightly revised down fourth-quarter economic growth, providing support for gold prices, but gains were limited as traders focused on key economic data and comments from Federal Reserve officials on the timetable for interest rate cuts.
This trading day will release the U.S. PCE data that the Federal Reserve focuses on in January. The market expects core PCE to increase by 0.4% month-on-month, compared with the previous value of 0.2%. Core PCE is expected to increase by 2.8% year-on-year, compared with the previous value of 2.9%. In addition, this trading day also Changes in the number of people filing for initial unemployment benefits in the United States will be released. The market expects it to be 210,000, compared with the previous value of 201,000. Investors need to pay attention to changes in market expectations for the Federal Reserve to cut interest rates.
Additionally, a fresh decline in U.S. Treasury yields prevented bearish traders from making big bets on gold prices and helped limit the downside. Compared with forecasts for a rate cut in March at the beginning of the year, recent Fed comments and hot inflation data have pushed bets on the Fed's first rate cut to June. Higher interest rates tend to dampen investment confidence in gold.
Gold technical aspect
Daily resistance 2037-40, lower support 2000-1966
Four-hour resistance 2037-40, lower support 2015
✅Gold operation suggestions:
Gold is constantly oscillating. Today, the upper resistance is around 2037-41. Relying on this position, continue to go short once. The lower support is around 2020. During the day, rely on this range to sell high and buy low. You can participate multiple times.
SELL:near 2041
SELL:near 2015
BUY:near 2000
Technical analysis only provides trading direction!
Calling Out All Traders: Paper Trading Competition Drops SoonWe’re spinning up the first-of-its-kind trading competition and you’re all welcome to join!
Traders, speculators, active investors and even the FX gurus on Instagram and the “live like me” trading influencers — this one’s for you all.
Show us what you’re made of in our first-ever paper trading competition The Leap .
Before we give you the full spill, let’s get to the lowdown:
The Top 5 get to walk away with real cash . From first to fifth, prizes are as follows: $10,000, $5,000, $3,000, $2,000 and $1,000.
Didn’t get to the Top 5? You still get a prize : one free month of TradingView if your account is in profit.
Trading kicks off March 1 and wraps up March 31. Registrations are available to paid users until March 15, 2024.
Now the bigger picture.
Are you going to get outtraded by a Reddit degen? There’s only one way to find out.
Test your trading strategy if you’re a newcomer or show off your skills if you’re a market wizard — The Leap paper trading competition is risk free and available to all who have a paid account with TradingView.
Join, trade on our The Leap paper trading account and see if you can make it to the top.
So what’s up for grabs?
We’ve leveled the playing field by introducing four overarching assets you can trade.
EURUSD – for the currency specialists, this FX pair is sure to stir up your portfolio (and emotions) due to its elevated volatility and high volume.
SPX500 – the S&P 500 is America’s broad index, packaged with the biggest public companies, including iPhone maker Apple and EV giant Tesla.
BTCUSD – crypto bros, assemble! The OG token made it into our exclusive selection thanks to its, well, ability to make or break trading careers.
XAUUSD – gold bugs, it’s your time to shine. Get a hold of the yellow metal if you believe it’s the one asset to carry you into the Top 5. Or short it if you don’t.
Each of these assets is a representation of its own asset class and gives you exposure to a specific market. Broadly, these four cover the most traded corners of the financial markets and you can trade them individually or even simultaneously.
Ready, set, go!
Earn your bragging rights – finish first and go boast on socials, getting your well-deserved praise as TradingView’s top trader in our first-ever paper trading competition!
Now the links:
Join The Leap paper trading competition and start warming up.
Read our T&Cs to get familiar with the formalities around The Leap.
Check our FAQ's here
Sign up for The Leap today and show everyone (and yourself) how trading is done!
The TradingView Digest - February 27thThe TradingView Digest - February 27th
Hey everyone! Welcome back to the TradingView Weekly Digest. In today’s edition, we’re highlighting the top posts from our community, which includes a video tutorial on TradingView’s paper trading feature, an informative post about Bitcoin halving, a post on finding trade setups, and all the latest headlines, earnings, and economic events.
💡🎥 How-To: Use the TradingView Paper Trading feature - by TradingView
TradingView's Paper Trading isn't just for practice; it's a detailed educational platform that closely simulates the real trading environment, all without the risk of losing money. This feature is carefully crafted to mimic actual market scenarios, offering users a realistic preview of how their trading plans might fare.📖🧾
💡🎥 Understanding Momentum to find the Best Setups - by TradeTheStructure
In the video, I discuss how I analyze momentum using MACDs and 5-minute/1-minute charts for day trading. This approach helps me filter out the best setups, positioning myself strategically in the market and within the right trading zones. The key concepts covered in this video include momentum, price action, candle analysis, and multi-timeframe analysis.
📰 Top Stories
Nvidia Market Cap Hits $2 Trillion During Post-Earnings Rally
Google Halts Gemini's Image-Generation Over Bias
Does Bitcoin Halving Still Matter in 2024?
Home Buyers Are Back in the Market. They're Shrugging Off Higher Prices and Mortgage Rates
Riot Platforms boosted BTC output by 19% in 2023, mines 6,626 Bitcoin
💵 Earnings highlights from the previous week:
Warner Bros. Discovery's Q4 Net Loss Narrows, Revenue Declines
Berkshire Hathaway reports record cash as earnings pop in Q4
Block's Q4 Earnings Surge
American Software (AMSWA) Q3 Earnings and Revenues Beat Estimates
Mercedes' (MBGAF) Q4 Results, Buyback & EV Strategy in Focus
💡 What Is Bitcoin Halving? Here's All You Need to Know - by TradingView
Halving, a milestone event in the crypto space, occurs approximately every four years, reducing Bitcoin's mining rewards every 210,000 blocks. Satoshi Nakamoto, the individual or group that created Bitcoin, set a fixed limit of 21 million coins, ensuring that the total amount of Bitcoin can never go above that number.
💡 Bad News for USD Longs? - by FPMarkets
According to the US Dollar Index, dollar longs are under pressure. Despite technically still exhibiting an uptrend, there are signs of emerging technical weakness. Since topping at 104.97 in mid-February, just shy of the resistance at 105.04, price action has tunneled through support at 104.15 (now marked as resistance), in addition to channel support extended from the low of 100.62.
🌟 Script of the Week
📜 Percent Rank Histogram - by VanHe1sing
This script visually displays the percentage of historical data points that are less than or equal to the current value for multiple financial instruments.
💭 Our Weekly Thought:
“Good traders try to avoid losing money. Great traders accept they will lose money.”
We hope you found this helpful. Please share your feedback, comments, or suggestions with us in the comments below.
TradingView Team
📣 Want to be among the first to know all the news? Give us a follow!
Microsoft Replicating 1987 SPX ChartSince Microsoft bought ChatGPT back in March 2023, the price of NASDAQ:MSFT stock has gone on to replicate the same pattern as the 1987 S&P500 stock market rally.
Does it mean anything all by itself? No. It still needs a catalyst for the drop to happen. The 1987 stock market crash had many triggers and catalysts and the drop was a sharp 40% from August 28th, 1987 to October 19th 1987.
What would cause a sharp 40% drop in NASDAQ:MSFT ? You all could type in your guess in a reply to this chart. It could come about under a variety of situations, but it would take an act of Government regulation or a major sea-change in laws or the business environment.
When you see people posting "overlays" of the market to past debacles, you will find almost NONE of them work.
Last year in January I posted a pattern where NASDAQ:TSLA was mimicking the fundamental and technical price pattern that NYSE:MCD McDonalds had from over a decade ago when it fell 75% on a rough patch for its business. It turned out to be identical and NASDAQ:TSLA rallied over 150% last year just exactly the same as happened to $MCD. I'll post the link down below for you to view.
The overlay here between NASDAQ:MSFT and the 1987 SP:SPX is pretty amazing but we have no catalysts to make it drop. Stay tuned on any weakness and look for cheap hedges (long term puts out to July-Oct-Dec for this year). Don't spend more than 1% of an account to hedge a position, but if you hedge it correctly you can protect against a large decline without much cost to a portfolio.
Here's hoping this pattern doesn't 'pan-out' because it would be or could be very disruptive to the markets.
Wishing you all health and success in the markets this year and thanks to TradingView for all of the great tools for doing research!
Cheers,
Tim
Friday, February 23, 2024 8:59PM EST
The AI Crypto Boom: Is This the Beginning of a New Era?2023 has witnessed a significant surge in AI-related cryptocurrencies . This boom can be partly attributed to the explosive growth of NVIDIA (NVDA) stock, a leader in the graphics processing unit (GPU) industry, which are used to train AI models.
Factors Driving the Growth
NVDA's Rise: NVDA's price has been on a tear, forming a bullish manipulative pattern. This bullish trend has inspired investors to have similar expectations for AI-related coins.
AMD's Accumulation-Manipulation-Distribution Pattern: AMD is not a competitor of NVDA in this context, but rather an example of a successful "accumulation - manipulation - breakout" pattern.
This pattern is characterized by a period of accumulation, where investors slowly buy up a coin, followed by a period of manipulation, where the price is artificially inflated, and finally a breakout, where the price rises sharply due to increased demand.
Effect on Other Coins:
The bullish trend in NVDA and the successful breakout of AMD's accumulation-manipulation-breakout pattern have led to a surge in AI-related coins such as RNDR, THETA, NEAR, and FET.
A Look at Promising Coins:
RNDR: Render Network utilizes a decentralized network for 3D graphics and video rendering. The rise of the metaverse could potentially drive demand for RNDR's services.
THETA: Theta Labs aims to revolutionize video streaming by providing a decentralized content delivery network. The growth of streaming content could make THETA an attractive investment.
NEAR: NEAR Protocol is a smart contract platform focused on scalability and speed. The growth of decentralized applications (dApps) could make NEAR a valuable choice.
FET: Fetch.ai is developing a decentralized network for exchanging data and machine learning models. The growth of AI could increase demand for FET's services.
Important Considerations:
The cryptocurrency market is volatile and unpredictable. It is crucial to conduct your own research before investing in any coin.
This article is not financial advice. Only invest what you can afford to lose.
Conclusion
AI-related cryptocurrencies are experiencing impressive growth. While it is impossible to say for certain whether this is the beginning of a new era, the possibilities of AI in the crypto space are worth considering. However, it is important to conduct thorough research and understand the associated risks before investing.
Bitcoin to continue outshining Gold In 2024Bitcoin (“BTC”) – the millennial gold - continues to outshine traditional gold. BTC prices have climbed higher after the listing of spot ETFs. A wider bull rally in the cryptocurrency markets is also underway. ETH touched its highest level since 2022. The total cryptocurrency market cap is 14% higher YTD.
A diverging outlook between BTC and Gold is emerging. After reaching all-time-high in December 2023, gold prices have pulled back this year. Stronger dollar fuelled by delayed rate cut expectations are taking shine off gold.
Halving event and bullishness from spot ETFs make for shining prospects ahead for BTC. In sharp contrast, macro backdrop dragging gold down leading to potentially lacklustre price performance. Collectively, this makes for a compelling spread positioning comprising long BTC and short Gold.
BTC RALLY HAS MORE STEAM
BTC is 12% higher YTD. It has marched higher with solid momentum post the spot ETF launch. Multiple factors point to further gains in store. For one, sustained net inflows to spot ETFs signal strong demand from US investors for BTC.
Volumes in spot ETFs reached its highest level since its launch on 21 February 2024. Participation was broad across several investors with 32,000 individual trades (sixty times the average), indicating widespread demand across investors.
BTC halving is due in a little less than a month, fuelling additional bullish sentiment. Lower supply of newly mined coins is expected to drive prices even higher.
BTC is currently trading 15% below its production cost, calculated by Capriole Investment using power consumption figures from the Cambridge Bitcoin Electricity Consumption Index . This index has served as a strong price floor over several years. Miners are unlikely to sell their BTC holdings below their cost of production, consequently reducing selling pressure below this key support level.
While BTC production cost acts as an indicative support level, BTC may continue to trade below this level. For one, miners have built up BTC holdings over the past year, which they can opt to sell for a substantial profit below the new production cost.
The surge in BTC over 2023 has started to spill over to other digital assets. A broader digital asset rally is under play with ETH retesting its highest level since 2022 this month.
The potential for further appreciation in BTC is high if markets are currently at the cusp of a wider crypto rally.
Finally, traders have been avoiding substantial short positions. As Bitfinex highlighted , the short-squeeze ratio is lower this year, compared to previous years which suggests large whale investors have not been taking substantial short positions.
However, institutional positioning in CME BTC futures paints a contrasting picture. Asset managers have built up record long positioning while leveraged funds have built up record short positioning on CME BTC futures.
DELAYED RATE CUTS TAKING SHINE OFF GOLD
Delayed rate cut expectations have led to a resurgence in the dollar causing a pull-back in gold prices.
Gold faces a double whammy in terms of asset rotation as both equities and the dollar remain strong.
RECESSION IS OFF THE CARDS
Mint Finance described gold performance during recessions and soft-landings in a previous paper . In summary, while gold prices rally sharply during recessions, performance is flat during soft landings, a situation where inflation subsides, and economic growth remains resilient. Over the past two soft landings, gold delivered flat returns.
While a soft landing is yet to be realized as both inflation and rate outlook for 2024 remains uncertain, a recession in the US has become a remote possibility. In fact, the Consumer Board has abandoned its long-running call for a recession in the US.
Consumer Board’s (“CB”) Leading Economic Indicator (LEI) signals turning points in business cycles and near term economic outlook. Since July 2022, the LEI signalled a US recession with the LEI in decline.
LEI fell to 102.7 in January 2024, its lowest level since 2020, yet CB has stated that it no longer anticipates a recession in the US.
CB still anticipates a slowdown this year with growth expected to be near zero in Q2 and Q3. Yet several LEI components have turned positive over the last six months, including equity performance.
An overly hawkish Fed makes the much expected Fed pivot less likely, for now, but the strength in the broader economy across businesses and consumers makes a slowdown unlikely.
FUND FLOWS – TALE OF TWO ETFs
Fund flows for BTC and Gold ETFs also suggest a vastly diverging picture. Investors have responded exceedingly well to spot ETFs. Cumulative flows for spot ETFs have exceeded USD 3 billion in a month.
For reference, it took GLD - the first Gold ETF - two years to get to this point. Though, as a counterpoint, the ETF market and money supply are much larger now compared to when GLD was launched.
Net fund flows for BTC ETFs were close to zero for the first few days after launch as GBTC outflows shifted towards lower-cost ETFs. Since February, inflows to spot ETFs (excluding GBTC) have accelerated while GBTC outflows have slowed. The result is sharp growth in net inflows suggesting strong and positive investor response to spot ETFs.
Data Source: TradingView and ETFDB
While BTC Spot ETFs has been enjoying consistent net inflows, Gold ETFs have been awash with fund withdrawals and redemptions.
Data Source: TradingView
Contrasting cumulative net flows into BTC ETFs & Gold ETFs shows a stark divergence in expectations ahead for the price of these two similar assets.
Data Source: TradingView and ETFDB
Outflows from gold ETF’s represent asset rotation out of gold with some of those assets going towards equities and bonds.
HYPOTHETICAL TRADE SETUP
An unfavorable macro outlook is weighing on gold while BTC faces a positive outlook with tailwinds likely to push prices higher. A position combining a long position in BTC and a short position in Gold benefits from both rising BTC and falling gold prices.
This spread does not compromise on performance as past rallies have yielded similar performance in the BTC/Gold ratio. BTC/Gold spread has not been an effective hedge as the ratio does not perform better during downturns.
A hypothetical spread trade consists of long four lots of Micro Bitcoin futures (MBTH2024) and short one lot of Micro Gold futures (MGCJ2024).
This position requires margin of 4 x USD 1,120 (=USD 4,480) on the BTC leg and USD 830 on the gold leg:
• Entry: 25.32
• Target: 30.60
• Stop Loss: 21.30
• Profit at Target: USD 4,310
• Loss at Stop: USD 3,285
• Reward/Risk: 1.3x
MARKET DATA
CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
