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You may not realize it, but trading is incredibly competitive.

As retail traders, we’re primarily used to being in competition with the person on the other side of the trade, fighting for the best price execution.

But there’s the other side to this business that often gets overlooked, which is trying to outperform the benchmark.

To outperform the broader market takes time and discipline.

Time to find the securities that are ready to outperform, and the discipline to effectively manage these positions from entry to exit.

Today, I am going to introduce you to one method of analysis that is rarely discussed, but where the insights are easy to obtain and offer a treasure trove of information. We’ll apply this analysis to one of the biggest stories in the market this past week, and discuss what the implications may be in the crypto space.

Job postings can often hold industry-changing implications

Walmart is looking to hire a senior director to lead its digital currency strategy, it said in a job posting on 08/15, in another sign of major retailers exploring the potential benefits of crypto.

Needless to say, this is a big deal.

With nearly $520B in revenue in 2020, Walmart is the world’s largest retailer, according to the National Retail Federation.

This comes after the world’s 2nd largest retailer, Amazon, posted a similar job description in July.

While these postings offer no guarantees that these industry giants are going to start accepting digital currencies as payment, it sends a strong signal that they are seriously considering such a move.

Other forms of evidence that corporate companies are taking cryptocurrency seriously comes from credit-card providers Mastercard and Visa, who are already working cryptocurrencies into their payments networks, to enable merchants to process and accept digital currencies.

Bitcoin is trying to gain an important foothold

Technically, bitcoin has shown significant improvement in recent weeks.

Specifically, the digital currency has rallied as much as 64% after falling 53% from mid-April to mid-July of this year.

In the process, this key cryptocurrency, still the largest by marketcap, is now showing that it may be ready to use the all-important 200-day moving average, which it recently closed back above for the first time since mid- May, as support.

Figure 1

If it can hold this position, it would be an important technical development that can embolden crypto bulls.

What do the setups in key crypto stocks look like?

As the bottom panels on Figure 2 show, the trailing 20-day correlation between Bitcoin and some key crypto stocks peaked recently, but remains very strong.

Figure 2

As a reminder, correlation basically tells us how closely two instruments have been trading over a certain time period.

In the examples shown above, the bottom correlation studies are looking at each stock’s correlation vs. Bitcoin over the past 20 days (1 month of trading).

In absolute terms, some of the better technical setups right now are seen in MARA, BTBT, and BITF.

As Figures 3, 4, and 5 show, this is primarily because each still trades above the Anchored VWAP from the most recent major price lows.

Figure 3

Figure 4

Figure 5

For other popular crypto stocks like RIOT and COIN, the setups are less fortified, with both trading with neutral near-term technicals and struggling to regain firm footing back above Anchored VWAPS that have been rising from their respective July price lows.

Figure 6

Figure 7

Bottom line

Job posting developments like what was witnessed from Walmart this past week, and what was announced by Amazon weeks earlier, are important forms of analysis that can offer significant insight into an industry’s direction.

Technically, however, it can sometimes be difficult to determine if these developments have already been priced into the market, leaving prices exposed the corrective weakness until the next set of supportive developments arise to attract new buyers.

Right now, with Bitcoin still attracting a bid above its 200-day moving average, it can be said that the market is still attracting new buyers.

In other words, as long as it can hold this position it can be assumed that recent developments have not been priced in, leaving the door open for the rally to reach new heights.

Given their still strong correlation to Bitcoin, the stocks highlighted earlier with current positions above their respective Anchored VWAPS (MARA, BTBT, BITF) are the preferred trading vehicles for traders looking to establish long positions in this space, because these VWAP levels can be used as stop protection in the event Bitcoin fails to build on its recent rally and closes back below its 200-day moving average to signal the start of a correction.

Author:
Jason Bond

2 Comments

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