You can tell how weird the investment world is getting by looking at the price chart developments recently in 3 different markets. We are seeing the kind of movements and patterns that you weren’t used to seeing every day but have become normal lately in most of the financial / business media.
Nouriel Roubini says Bitcoin is a modern-day tulip bulb mania-style phenomenon. In other words, according to its terms, the price no longer has any relation to the reality of the underlying asset. Cryptocurrency enthusiasts reject the idea claiming that this is a whole new world misunderstood by old school guys like Roubini.
This Forbes blog post from mid-December 2020 shows that a move above the previous resistance of 14,000 would likely mean a breakout to higher levels. This level where, if the buyers overwhelmed the old sellers, the price would be free to pick up again. Looking back, it’s clear that new buyers were indeed ready to come.
The monthly Bitcoin price table looks like this:
Once it broke through the previous resistance of late 2017 at 20,000, buyers couldn’t hold back. You can’t find a lot of monthly price charts with these kind of long, bottomless candlesticks.
Next: how the price of Hecla mining moved before, during and after a short squeeze attempt. Some traders thought they could do with money (and silver stocks like $ HL) what the folks at Reddit did at GameStop a few days earlier. As you can see from this daily chart, it didn’t quite work out for most of the participants.
The spike came on a Monday following a weekend of hype on Twitter where “#SilverSqueeze” became a trending topic. Notice how quickly the price has risen and then fallen back to old levels. This is the type of move you might see with an hour-long false buyout and then refused. He’s a rare and long enough type of abandoned baby doji to say it in candlestick terms.
However, some traders had been prepared for this on social networks. Many stocks involved in metals and mining had this kind of look that week. It almost felt like an experiment to see how much and how quickly money could be made using Redditt Wall Street Bets style tactics.
Finally, here is the monthly chart of the Pro Shares Ultrashort Financials ETF.
It is designed to take advantage of declining prices in bank stocks and associated financial institutions. The fund designed by derivatives can amplify gains (or losses) by a factor of 3. Some experienced traders use it for intraday trading only. Some don’t.
In a sense, this is the upside down version of the Bitcoin chart. Incredibly hot and heavily traded in 2009 and today it is largely ignored and avoided. A fund price close to 9000 that year is now trading for a measly 12.70. They call it the boom / bust cycle because the boom seems to have a bust path.
I do not hold any positions in these investments. No recommendation is made one way or the other. If you are an investor, you would like to explore each of these situations further. You can lose money by trading or investing in stocks and other instruments. Always do your own independent research, do your due diligence and seek advice from a licensed investment advisor.