It has been no secret that Bitcoin has made over a 1000% move in the past 12 months. The sensational cryptocurrency has been creating the same level of bullishness in stocks as well. Any stock that has any remote tie to Bitcoin, or blockchain technology has been flying. Here’s how you can capitalize on this insane trend in stocks if you do not trade Bitcoin directly.
Always Pay Attention to Bitcoin’s Trend
You should always have a Bitcoin chart up when you are trading a stock running on a bitcoin/blockchain catalyst. Bitcoin strength will add the probability of a blockchain related ticker following through. On the flip side, Bitcoin weakness will decrease the probability of the ticker failing. This does not mean that you buy RIOT or XNET as soon as Bitcoin breaks to a new all time high. You still need a setup to justify putting your capital at risk. You can see the setups that we took to capitalize on the blockchain stocks in this video.
Respect the Stock’s Price Action
Bitcoin strength is merely just another variable that will increase the probability of one of the blockchain tickers’ setups playing out and following through. However no stock will be able to emulate the trend that Bitcoin put on. XNET and RIOT are fundamentally weak companies that are just catching momentum because of the bitcoin hysteria. They're not something to marry. If Bitcoin is breaking out and XNET is rolling over, you need to obey your stop and respect the price action.
Don’t Chase Strength in Sympathy Plays
Chasing strength is bad in any stock, but it is especially bad when you're trading a sympathy play. Sympathy plays have less of a reason to hold up since they have no real catalyst behind them. If you get a bad entry, you will often screw up your risk versus reward on the trade by buying to high. It will cause you to get emotional because as soon as you enter the trade, you know you did something wrong. In my trade with MARA, I got a bad entry and didn’t let it play out, even though I would have made a huge gain. The lesson is to always be patient on your entries. More often than not, stocks will retrace after they breakout and there is no reason to chase.
We teacher students how to trade these type of plays in our 60 day bootcamp. To claim your seat for our next start date please email Maribeth@bullson.ws.