Weekly Market Overview November 14, 2021

Nov 13, 2021

This past earnings season was dramatic, to say the least. A friend of mine (who manages a $2 billion long only equity fund) and I were chatting a few weeks ago about the earnings season and he expected a lot of the "digital acceleration" winners (companies that were accelerated forward from COVID or from the re-opening) to miss their expected numbers this season. 

Obviously he's not a Millennial LOL

He nailed a number of these that sold off hard, being long only his job is more about being in the companies that are going to meet or beat their earnings and grow over time. 

He was early on Microsoft when they changed CEO's and has continued to reap the rewards of that one. 

A couple of other companies that he's interested in, if you want to research some great public companies for your longer term investments, these might be of interest, $DXCM, $TECH, $CMG and $SEA.

I asked him about $COIN (one that I bought personally earlier this summer) since he's an equity guy and here were his thoughts.

The real reason I bring all of this up is, of the 1,000 or so messages we have between each other, these are the few that don't have to do with Crypto, and pretty much right after the last message he drops this...

A crypto fund, he wants to start a crypto fund!

He proceeds to ask me incredibly detailed questions about Layer 1's, Layer 2's, DeFi 2.0, Web 3.0, ZK rollups, sharding, staking, off chain storage... he has obviously gone far down the cryptoverse. 

He is as traditional Wall Street as you can imagine, and he is spending every waking minute learning about crypto. 

Crypto is still at an early stage in its life, and there are a lot of traditional Wall Streeters that I talk to who are looking at, or have already, made moves to get involved in the cryptocurrency space. Whether that means starting funds or actually operating a cryptocurrency based business, they are coming in hot!

Nothing has changed about my thoughts on this bull market in crypto.

I'm still long, still no top in sight!

The two most important projects in the space right now, $ETH and $SOL are proof why. 

Let's start with $ETH Ethereum

What you want to see when an assets is putting in new all time highs, is you want to see consolidation at the all time high.

Our most important model is to focus on the reaction to the action, instead of reacting to the action itself. Simply because something happened isn't as important as to the reaction to the event. 

In this case $ETH puts in new all time highs, then sells off for a few days. That's action, the all time high, the reaction is the selloff, and that's what we are watching, what is happening in the selloff?

In every instance buyers have stepped in and brought the price back up to new all time highs. And the pattern repeats itself, prices blast off to new all time highs, only to be sold off and bought up again. 

Another thing to note, that these new all time high volatility events happen and big round numbers, 4000, 4200, 4400, 4800.

When we get to 5,000 I'd expect a lot of people will have limit orders up there waiting to take profits, ie, a lot of sell orders. The reaction to that big 5k number is far more important than hitting the big 5k number. 

$SOL Solana

A direct competitor to Ethereum is Solana, a substantially faster smart contract platform. Of course its speed comes at a cost, as you'd expect, in order to get speed you have to give up something, in this case its you give up the decentralization to gain speed.

Think of it as a race car, you give up a lot of things to get the speed performance with a race car. 

There's no reason to get in to too many of the details of the differences here, because like everything, there is nuance. 

Solana has proven (mostly) itself a useful smart contract platform and has provided a very useful service to the cryptocurrency ecosystem, notably in DeFi (Decentralized Finance) and NFT (Non-fungible tokens) space, where transaction costs on Ethereum (Gas Fee's) have been astronomical lately and participants demanded better experience. 

More important to me is the price action. 

We've seen $SOL continually put in new all time highs. This is reaction to the action, that is important, as new all time highs continue, the consolidation tends to stay up near the highs as demand continues to increase. 

$SOL and $ETH are two of the most important ecosystems in crypto right now, for doing more than just hedging against inflation or governments, like Bitcoin is excellent for. 

These are different tools than Bitcoin, they aren't pretending to be Bitcoin.

Currently our most active channel in the Trading Lab Slack is the Crypto Channel, and an excellent place to get ideas, find research, learn about the technology and collaborate on some of the more obscure opportunities hidden deep within the cryptoverse. 

Last week for example, Grant and Kyle gave a presentation on the Olympus DAO and the opportunity with staking $OHM, needless to say it was well received. 

The video is accessible to all Lab Members in the Trading Strategies section of the Trading Lab Video Library along with 100's of other videos. on strategies, markets, and the Trading Lab Trading Course. 

Join Us in the Trading Lab


Despite all this coverage and talk of crypto, I've been spending most of my time on equities these past few months. 

Opportunities that we have in the equities markets using our new options swing trading strategy are enormous, so much so I actually sold some of my crypto to fund my options account. 

The new strategy currently has positions in $ABNB, $AAPL, $COIN, $GOOGL, $AMAT, $DBA, and $YCS.

This is a strategy that I've been working on over the years focused on catching early entries in big momentum moves, like these in October of this year.

$NVDA made over 1000% on the calls in one trade

$TSLA paid approximately 600% on its option trade

And $MSFT was a 4 bagger

I'm very excited about this strategy, I've got 20 years of backtesting done on this strategy and will continue to expand on my research. 

The strategy is only for Trading Lab members, though I may offer this strategy separately to those who don't want to spend time in the Lab and would just rather get the strategy.

Let me know if that would be of interest, for this, or any of the trading strategies we use here. 

I'll be writing a bit more often, feel free to reply to this email and ask what you'd like me to write about. 

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