Bitcoin is charging higher as bulls look for a rebound in the crypto market. Oil prices continue to swoon as The Daily Breakdown digs in.
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What’s Happening?
Volatility can cut both ways — and that was on full display yesterday. At one point, oil was trading above $100 a barrel and the S&P 500 was down as much as 1.5%. By the closing bell, the S&P 500 had climbed 0.8%, the Nasdaq 100 was up 1.3%, and crypto had started to rebound as well.
That’s the trouble with trading headlines. While it can create short-term opportunities, conditions can also turn on a dime, making it a difficult environment for investors. Active traders may try to capitalize on the back-and-forth, but more passive investors may prefer to use pullbacks to add longer-term positions in their highest-conviction holdings when they’re being discounted.
Week Ahead
Nio and Kohl’s report earnings this morning, while Oracle reports tonight. Other notable names this week include Dollar General, Dick’s Sporting Goods, Adobe, Lennar, Rubrik, and Ulta.
On the economic front, it’s a big week for inflation. The CPI report is due at 8:30 a.m. ET on Wednesday, while the PCE report — the Fed’s preferred inflation gauge — is released Friday at 8:30 a.m. ET. Friday also brings the next GDP update, along with the JOLTS report, which will offer an update on job openings, quits, and layoffs.
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The Setup — Bitcoin
It’s no secret that Bitcoin has struggled this year, but it’s been trying to find some momentum lately. It finished higher by 3.8% yesterday and is up around 3% to above $70K this morning. Below shows the weekly chart on the left and the daily chart on the right:
Notice on the daily chart (right) how BTC has made a series of “higher lows” — meaning each dip is more shallow than the last. Bitcoin hasn’t taken out its low from early February, either.
On the weekly chart (left), how BTC remains above its long-term, upward-trending 200-week moving average, as it now contends with a key support/resistance zone in the $70K to $75K range. For bulls to gain long-term confidence in the charts, Bitcoin needs to regain this area. Until then — and especially if BTC remains below it — volatility may persist.
Options
For investors who can’t trade or aren’t comfortable trading cryptocurrencies outright, they can consider ETFs for BTC and ETH. On the BTC front, IBIT remains the largest ETF by assets, while also supporting options trading.
Bulls can utilize calls or call spreads to speculate on upside, while bears can use puts or puts spread to speculate on downside. In either case, investors may consider using adequate time until expiration.
For those looking to learn more about options, consider visiting the eToro Academy.
What Wall Street’s Watching
VIX
On Monday, the CBOE Volatility Index — or the “VIX,” dubbed Wall Street’s fear gauge — hit its highest levels in almost a year. While the VIX dipped notably into yesterday’s close, the recent spike in volatility is a reminder to investors of how quickly things can change. It’s a good opportunity to go over portfolio construction and understand personal risk tolerance.
VRTX
Shares of Vertex Pharmaceuticals rose after the company said its drug povetacicept met its primary endpoint in a late-stage trial. Vertex plans to seek FDA accelerated approval by the end of March. The company gained the drug — which treats the kidney condition IgA nephropathy — through its $4.9 billion acquisition of Alpine Immune Sciences in the second quarter of 2024. Dig into the fundamentals for VRTX.
DOGE
This morning’s crypto bounce isn’t limited to just BTC and Ethereum. Dogecoin, Stellar, and Shiba are also trending higher, with all three up between 5% and 6%. Elsewhere, while Akash Networks may be small — with a current market cap of just $122 million — it’s joining in on the crypto rally too, currently up more than 13% to a one-month high. Discover more cryptocurrencies here.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.