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Analysis

5 Things to Watch Next Week: Bitcoin at $5000?, Trump’s Only Option, Overbought Stocks, Catalonia and the UK, The Dollar Rally

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1.            Bitcoin Shooting for Record Highs?

As the bullish trend in cryptocurrencies continues to prevail, the different coins are showing more and more divergent paths, and Bitcoin and Ripple are the undoubted leaders currently. The most valuable coin is only 10% below its all-time high today, and after the shallow and encouraging correction, all looks set for at least a re-test of the previous highs. Bears would like to see a double top forming in BTC, odds favor a continuation of the trend, even amid the hard fork speculation. As for the previous fork, the market share of Bitcoin Cash continues to dwindle, and the original chain is getting stronger by the day. The technical setup is also clearly positive, and the next week could see BTC above the historic $5000 mark.

Bitcoin, 4-Hour Chart Analysis

2.           Trump Changing the North Korea Narrative?

The North Korean crisis that is still one of the biggest short-term risk factors for the market, even as, hopefully, the involved nations are not willing to go all the way with their threats and a peaceful solution will be reached. The POTUS had a couple of serious-looking comments on North Korea and Iran this week, and he mentioned that there is only one solution left for Kim Jong Un. While we don’t know yet what Trump meant with that, a radical change in the US policy could lead the next risk-off move in the light of the overbought state of the stock market. As safe-haven assets are still being sold, with the Yen and gold being in correction mode, a risky move by the President could lead to a quick surge in volatility and risk-off complex.

3.           Stock Markets Looking Stretched

The 8-year old bull market in equities is alive and kicking, and this week was nothing short of spectacular for bulls as the most important US and European indices all ended the week near or at their all-time highs. The short-term strength that we noted in August might be ending though, as the rally reached a strenuously overbought state, with the tax-plan induced small cap surge delivering the final blow for bears. While the valuation of the market has long been extraordinary, the “everything bubble” fueled by the main central banks is yet to pop, and the rising trend is still undoubtedly intact. That said, those investors that are overweight equities have a great opportunity to reduce their exposure here.

S&P 500 Futures, 4-Hour Chart

4.           What’s Next for Catalonia and Theresa May?

The political crises in Spain and the UK made headlines this week, with the ensuing weakness in the Great British Pound and Spanish assets showing the extent of the troubles. The Catalonian situation could easily get worse, as the tensions are still high in the region, and there seems to be little chance for a quick solution based on compromises. As for the UK and Prime Minister May, it’s probably early to say that her days are numbered, and we wouldn’t sell the Pound here based on the recent events, but keeping an eye open is certainly justified. Looking at the most affected currency pair, EUR/GBP is nearing the key $0.90 level, and we wouldn’t be surprised by a rally in the Pound against the common currency.

EUR/GBP, 4-Hour Chart Analysis

5.           More Upside for the Dollar?

The Greenback has been showing strength this week, especially against Great British Pound, the Yen, and Aussie, but also against the rest of the major currencies. After the lengthy decline of the Dollar, the hawkish change in the Fed’s rhetoric and the much better than expected PMIs boosted rate hike expectations and in turn the currency. The looming end of Janet Yellen’s term as Fed Chair also put some upward pressure on the USD, and if the positive trend in economic numbers continues, the currency could correct more in the coming weeks. Next week, the meeting minutes of the Fed Wednesday, and the Retail Sales and CPI reports on Friday will be the most-awaited releases, while Mario Draghi’s speech on Thursday could also have a meaningful effect on forex markets.

Key Economic Releases Next Week

Day Country Release Expected Previous
Tuesday AUSTRALIA NAB Business Confidence 5
Tuesday UK Manufacturing Production 0.3% 0.5%
Tuesday UK Goods Trade Balance -11.2 bill -11.6 bill
Tuesday CANADA Building Permits -3.5%
Wednesday US JOLTS job Openings 6.06 mill 6.17 mill
Wednesday US FOMC Meeting Minutes
Thursday CANADA NHPI 0.3% 0.4%
Thursday US PPI Index 0.4% 0.2%
Thursday US Unemployment Claims 255,000 260,000
Thursday EUROZONE Mario Draghi Speaks
Thursday US Crude Oil Invesntories -6.0 mill
Friday AUSTRALIA RBA Stability Report
Friday CHINA Trade Balance 266 bill 287 bill
Friday US Retail Sales 1.5% -0.2%
Friday US CPI 0.6% 0.4%
Friday US UOM Consumer Confidence 95.4 95.1

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 381 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Altcoins

TenX: Look Out The Brits Are Coming

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We have written about TenX in the past with admiration for its business model. We weren’t the only admirers.  Last year TenX raised $80 million, ranking it as the ninth largest ICO of 2017. But now, there is a new threat, UK based Wirex.  These Brits are less well financed but much further along with a real product ready to launch in the US. Could this could put the kibosh on tiny TenX? Let’s take a look.  

You Gotta Love The Concept: Mass Acceptance

Both TenX and Wirex share a similar business model. They make cryptocurrencies spendable anytime, anywhere in the world. Start with their wallet and add a supported cryptocurrency. Then when the need to fill the gas tank or pay for dinner arises, pull out your TenX or Wirex card bearing the VISA or MasterCard logo and complete the transaction.

During the transaction, your crypto is instantly converted to fiat in one seamless step.  The cost of this service to the cardholder is unclear but we presume it will have to compete with exchange fees from entities like Coinbase or Binance.

True, there are certain limitations. So far the Wirex wallet accepts only Bitcoin.  TenX boasts of accepting Bitcoin, Ether and Litecoin. That covers about 90% of crypto assets but still leaves out a long list of altcoins and the bazillion of recently minted stablecoins.

Other marketing highlights at the TenX website include the opportunity to “Spend at over 42 million points of acceptance online and offline, in almost 200 countries – perfect for the world traveller.”  Unfortunately the website also notes, “We’re working hard to bring the TenX Card to you as soon as possible. Join the waitlist in the app to be notified when it’s out.”

Neither approach is perfect.  For crypto purists the only solution is for Bitcoin and other altcoins to be accepted directly as a medium of exchange. Maybe that dream will take place by 2028 or sooner but be careful about holding your breath.

Another flaw is that both systems appear dependent on either the VISA or MasterCard payment rail (and this has been a big problem). Even under ideal circumstances these transactions fail to reach the dream of being both frictionless and free.  However from the standpoint of mass acceptance, the merchant is already absorbing these costs so it should not impede acceptance of either TenX or Wirex.

Wirex Comes To America

Now Bitcoin.com reports that Wirex, which just registered in Canada, has its sights on a US launch. There are two aspects about this that are worth noting.  First, Wirex is using transfer technology from i2c. Not being a technology mavin, it is unclear what this exactly means to things like speed and costs but it can’t hurt Wirex’s invasion of America.

So why should investors in TenX be concerned?  After all, things haven’t exactly been all that shining.  At one point this year, TenX ranked in the 50 most highly valued cryptos.  It pretty much carved out a giant sized niche.

And then back in January a great many of Visa’s cryptocurrency debit cards ceased working as the company ended its relationship with a debit card provider called WaveCrest. Affected cards were those issued by WaveCrest, including products from CryptoPay, Bitwala, TenX, Wirex and others. Since then, the price of TenX has dropped from $5 to about $0.55.

This is where the connection between Wirex and i2c could be the answer to the problem. According to Bitcoin.com “The relationship with i2c will enable Wirex to be the first crypto-friendly payment platform to offer this innovative service in the US.”

A Few Metrics on Wirex

If any published data can be believed, it would appear the Wirex already is a small force in crypto to fiat payments.  According to its website, Wirex has over 900,000 customers in 130 countries having participated in over $1 billion in transactions.  That maybe be peanuts compared to the total value of all transactions but it ain’t exactly chump change either.

So while loyal fans of TenX patiently wait for their plastic and investors sit on their $0.55 crypto investment, Wirex appears ready to steal the thunder.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 114 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Analysis

FedEx Goes Looking for New Lows

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

At a recent Federal Reserve meeting, the market was made clear that interest rates were going to rise, which means that the burden on business in the form of interest on borrowed funds will increase. The ‘cheap’ money has run out, and now overvalued companies will be heading to their real quotes. If you look at the market, the corrections are already beginning, and there is a decline in each sector. Under these conditions, stocks will be forming ranges, although in most cases they are already here. If the price is at the lower boundary, then we should expect an even greater decline, as new support levels will be formed lower.

The ‘weak link’ under these conditions will be the companies that have shown a significant decrease in profits in the current quarter relative to the previous quarter and to similar periods of the previous year.

Tips for trading here should be sought in technical analysis, since the fundamental one will not show negative trends in Q3, as reports will be provided for the previous period, and they will be compared with similar periods of last year, which in most cases will show a positive trend.

In this situation, it is possible to consider trading for lowering overpriced companies, but the trader needs to be aware of the risk they will be taken taking, as due to the gaps at the opening, losses can be fatal.

FedEx, a leading mailing operator, is among such companies that are set to decline in the near future. Quarterly reports show an increase in profits compared to the same period last year. With this in mind, it would seem, there is no reason for concern, as the fall in profits in Q3 this year was also observed last year.

FedEx

Meanwhile, the short float is as low as 2.01%. The debt to capital ratio is less than 1, which also indicates the company is good to invest into.

On Oct 18, FedEx announced the acquisition of Manton Air-Sea Pty Ltd, a leading logistics service provider based in Australia. This will allow FedEx to increase its presence in the Australian market. The transaction is scheduled to be completed by the end of this year.

Analyzing other financial indicators, the negative details can only be found in the discrepancy between the Q3 earnings per share predicted values, since the EPS expectations were at $3.80, and in fact it turned out to be just $3.46, which resulted in the company ending its trading session with a 1.7% decline.

Without going into details, the company’s profit is growing, dividends are paid, and there is no reason to worry, especially when the index is being bought heavily during such falls. Let’s get back to the reports however, and we’ll see the profit in Q3 decreased by 42% compared to the previous quarter, although last year it was only by 16%.

In July, Amazon announced its new project, Delivery Service Partners (DSP), as mentioned earlier in one of our analytic reports. This led to the largest international postal operator’s decline. The project by Amazon enables starting your own shipping business under Amazon brand. This project is already working and the goods, despite the problems that arise, are being shipped. This means that FedEx and UPS are guaranteed to lose some of their income. In the long term, the development of DSP will create an even more serious competition against postal operators.

Amazon’s policy led to FedEx shares losing around 16%, after which the price tried to recover, but nothing came out of it, and now it’s trading around the year’s lows. Another negative fact is that the price went below the 200-day SMA, which last occurred in 2015. Last time, after the SMA breakout, the price fell by 36% from its highs. The last fall was accompanied with the largest trading volume over the last 2 years, which increases the likelihood of further price fall.

The nearest support is around $200. Further decline may be news-driven and come later, as it often happens. A short-term price increase to the resistance at $240 USD is possible, but after that, a rebound and a more serious price fall to $200 may follow. With larger volumes or a consolidation range, a reversal may occur.

To sum up

According to the Federal Reserve’s latest meeting minutes, rate hikes are going to happen both this year and next. This will increase the cost of borrowed funds, which will lead to consolidation of the stock market and a possible sharp decline when approaching the highs. Some investors will close their positions on highs, trying to lock in as much profit as possible, after which they can move to less risky instruments such as bonds, whose yields will only increase with rate hikes.

Yet another crisis coming is often a surprise for investors, because usually everything starts with a small correction, which then rapidly develops into a market collapse and leads to a massive fall in stock prices. For this reason, investing in companies at current prices is not a good idea.

In this situation, it is best to look for small and unknown companies to buy, or to focus on those that are just starting their IPO’s.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 15 rated postsHaving majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.




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Analysis

Pre-Market Analysis and Chartbook: Stocks Plunge as Chinese Rally Fades

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Tuesday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,713 -1.59%
DAX 30 11,282 -2.06%
WTI Crude Oil 67.72 -2.11%
GOLD 1,241 1.38%
Bitcoin 6,393 -0.20%
EUR/USD 1.1469 0.05%

The major global stock indices are all significantly lower today just after the US open, with several European benchmarks hitting new multi-month and multi-year lows after the recent bounce. Chinese stocks turned south after the strongest two-day rally in years, and although the local markets remain above their recent bear market lows, the shift weighed heavily on sentiment across the globe, with the Nikkei also getting below last week’s minimum level.

DAX 30 Index CFD, 4-Hour Chart Analysis

In Europe, the DAX is the weakest major index again, and German stocks confirmed the long-term breakdown that we have been following in recent weeks. Today, chemical giant Bayer is pushing the benchmark lower, but the weakness in auto-makers also continues to drag equities lower together with the struggling financial sector.

Spreads between Italian and core Eurozone government bonds are still wide, as the budget debate continues to pressure Italian assets, and despite the relative stability of the Euro, European equities are in deep trouble.

EUR/USD, 4-Hour Chart Analysis

The Euro is hanging on a thread above its monthly lows against the US Dollar, while the broader Dollar index hit a marginal new 2-month high today. All eyes are on the European Central Bank and Italy this week, and with the US midterms approaching, things can get wild in currencies in the coming days, especially given the rising volatility in equities, and the general risk-off shift.

While the EUR/USD pair is trading below the 1.15 level, the Dollar failed to show momentum against the common currency with buyers consistently stepping in near 1.1440. That said, the broader downtrend is clearly intact, and a test of the support zone near 1.13 still seems like the most likely scenario in the coming weeks.

S&P 500 Hits New Correction Lows as VIX Eyes 25 Level

S&P 500 Futures, 4-Hour Chart Analysis

US index futures had an ugly overnight session before the pre-market earnings dump, with the Asian selloff dragging the major indices lower. While the Nasdaq is holding up above its recent lows, the Dow and the S&P 500 plunged well below their multi-month lows, and the small-cap Russell 2000 also opened deep in the red, below its correction low as well.

Short-term technicals continue to scream sell in the US, with the weak bounce clearing the bulk of the oversold momentum readings with regards to the key benchmarks, and with market internals still being very negative. For now, we would still not buy the dip here, especially as we see no major positive divergences in global markets either.

VIX (US Volatility Index), 4-Hour Chart Analysis

Looking at the Volatility Index (VIX), the regime change that we were speculation on at the start of the correction seems to be confirmed, with the VIX getting back very easily above the line-in-the-sand 20 level. The index neared the 25 level pre-market, and although the panicky 30 level is still well above the current zone, a concerted move below the lows could spark a renewed surge in the VIX as early as today.

This leaves a protracted correction as the best-case scenario for US stocks, but as usual with bearish trends, violent counter-trend rallies are expected along the way, punishing late shorts and resetting the negative sentiment.

ChartBook

Major Stock Indices

Nasdaq 100 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 381 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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