Bitcoin
The “sell the news” trade is turning into a technical tripwire as Bitcoin (BTC) is now hitting a round number that has previously supported the cryptocurrency four times since the beginning of March.
There are two parts to this “trade.”
First, the sentiment or psychological part.
The bitcoin halving “event” passed on April 19. For months, investors heard all about the halving and how they should be in Bitcoin ahead of the event. This led to a traditional “buy the rumor” rally that tried breaking through $70,000 multiple times.
Following the April 19 “event,” we’ve seen selling of Bitcoin that is similar to a “sell the news situation” that is a frequent occurrence for stocks. It makes sense now, Bitcoin has grown to become a mainstream asset, now it gets treated like one.
This sell the news action is taking Bitcoin to key round numbered support at $60,000. We’ve seen the $60k price act as support four different times since March. That fact alone makes it critical that the $60,000 level holds.
A break below $60,000 will increase selling pressure on the cryptocurrency, targeting an initial short-term target of $55,000 and then a deeper correction target of $50,000.
That $50,000 target would equate to an 18% correction from current prices and a 33% correction from Bitcoin’s recent highs of $73,700 in mid-March.
I’ll do a deeper dive into Bitcoin’s critical price battle as well as how the crypto bears can profit from the likely drop tomorrow morning.
Canopy Growth
The AP reported this afternoon that the Drug Enforcement Agency (DEA) is set to classify marijuana as a less dangerous drug.
The move comes after 24 states have passed laws making recreational marijuana legal and more are reported to follow in 2024.
Shares of Canopy Growth (CGC) are trading higher by more than 65% this afternoon in reaction to the news. The stock recently moved above its short-term 20-day moving average, indicating that short-term momentum was turning positive.
From a longer-term perspective, Canopy Growth stock’s 50-day moving average crossed above its 200-day moving average. This pattern is referred to as a “Golden Cross” as it indicates that longer-term positive momentum is accelerating.
Moreover, the stock just broke out of the sub-$10 trading range. Stocks that break back above $10 often continue their surge as the market reacts positively to “rising from the $10 ashes,” so to speak.
We’re likely to see resistance at $15 and $20 from here. It’s also wise to remember that this stock was trading above $40 as early as December 2022.
SoFi Technologies
Shares of Sofi Technologies (SOFI) are trading almost 4% lower today following the company’s earnings report.
For the quarter, SOFI beat analysts’ expectations for earnings per share and revenue.
The problem with the company’s report was the forward guidance for next quarter. SOFI management sees the company earnings less revenue in the coming quarter. The company also added that they are raising guidance for the fiscal year 2024.
Many times, a company, especially in an interest rate sensitive industry, will guide investors and analysts like this as they wait to see how economic conditions will play out. It is likely that SOFI is waiting to get a better idea of how many times the Fed will lower rates in 2024, which has a clear bearing on demand for their loan products.
Sofi’s chart isn’t as patient. The stock is breaking below $7 today with an increase in selling volume and volatility. This pattern is likely to guide the stock to a $5 target over the next four to six weeks as the 20- and 50-day moving averages remain bearish.
About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.