🥇 How To Win After The Market Moves Against You

What’s on the Menu 🍴

These are the times where investors & traders can rake in profits…

Or get left behind.

So in today’s Daily Dough, we’re walking you through some of the markets where we’ve made life-changing gains..

And diving into some valuable lessons to help you become a better investor.

Buckle up!

  • A Wild Week For Bitcoin (Market Update) ₿

  • How To Win After The Market Moves Against You 🥇

  • A Stock Chart Worth Watching
    During Bitcoin’s Bullish Momentum 📈

Today’s newsletter is a 5 minute read.

A Wild Week For Bitcoin (Market Update) ₿

Everyone is wondering why bitcoin has been booming since the ETFs launched last month.

So, I sent a market update video to our Wealth Building Community members…

And also posted the video to everyone on Twitter.

Here’s what you need to know:

1) ETF flows and volumes are booming

The new spot bitcoin ETFs have been picking up speed in both inflows (buyers) and daily trading volume.

Yesterday, the top ETFs traded over 3 BILLION dollars worth of volume.

2) Supply of Bitcoin on exchanges keeps falling

The amount of bitcoin’s available for people to buy on centralized exchanges like Coinbase and Kraken keeps falling.

This means as price goes up, demand keeps falling.

In fact, total balance on exchanges is at the lowest level since early 2018…

And falling!

What did we learn from high school economics class about what happens when demand goes up and supply goes down?

That’s right - prices continue to go up.

3) Shorts keep getting liquidated

There have been some very public haters of bitcoin, many who have ZERO skin in the game.

It’s easy to hate on the world’s best performing asset of the past decade when you don’t own any…

But how about when you’re shorting on it (looking to profit if it falls)?

Without naming any names, we’ve seen some very stubborn traders continuing to short as price keeps climbing.

And this actually adds fuel to the fire - as price goes up, and shorts have to cover (buy), it adds to the upwards price pressure.

Buckle Up For Wild Times Ahead

Looking back, it’s wild to see how the scariest time in bitcoin was THE low.

That’s right, the week when the crypto exchange FTX imploded, was the bottom of the bear market.

Does this mean price will continue going up forever without a pullback?

Absolutely not.

At some point (maybe this week), we’ll see a nasty shakeout.

But as far as we can tell, it’s very dangerous to be a bitcoin bear right now. 🐻

How To Win After The Market
Moves Against You 🥇

Warren Buffett’s mentor Benjamin Graham famously said “in the short run the stock market is a voting machine but in the long run it is a weighing machine”.

That’s never been more true than today, as retail traders and algorithms alike chase short term performance & momentum above all else.

Investors like us with longer time horizons can get really frustrated when the market moves against our positions on unimportant news or despite solid fundamentals.

But maintaining conviction quite often leads to the biggest rewards.

We were reminded of that lesson this week via Hims & Hers Health (ticker: HIMS):

This consumer healthcare company reported 48% revenue growth this week along with it’s first quarter of positive net income, sending the stock up more than 30%.

It has now more than doubled from our cost basis in the $6 range, but the ride has been anything but smooth.

We bought HIMS shares in December 2021 when the stock was already down 40% from the price it came public at via SPAC…

Yet it proceeded to trade down another 50% from our purchase price in 2022 DESPITE the company delivering better than expected growth (in excess of 80%!).

The fundamentals were robust & improving yet the market didn’t seem to care at all.

There were vague concerns about companies that had gone public via SPAC and worries about healthcare “disruptor” stocks after several flame outs including Teledoc and GoodRX.

There were probably many HIMS investors who capitulated and sold the stock in 2022 or 2023.

Yet the company kept executing quarter after quarter and investors who had the patience to sit tight have been well rewarded.

How does an investor stick with a stock when their position is in a major drawdown?

Here are some tips:

  • Ask yourself, is the original investment thesis still true? If the fundamentals are still strong / improving then it may be worth sticking with; if the thesis has changed it may be time to sell

  • Do you have time on your side? If the company is in good financial shape (growing, profitable, low debt, etc) the odds of the market eventually coming around are higher

  • Expect drawdowns: even the best companies experience significant drawdowns in their stocks; don’t fear a market correction or stock price decline

  • Embrace price corrections as opportunities: even though drawdowns test our patience, they can be amazing times to add to positions when they go on sale

  • Block out the noise: rather than focusing on price action, be productive with your time by going deeper with research into your investment; this will help you build confidence in your thesis or give you the insight needed to take a graceful exit

So much of success in investing comes down to conquering the emotions in those brains of ours amidst volatility & unpredictability in the market.

Lengthen that time horizon and don’t let the market scare you off of your highest conviction future winners!

A Stock Chart Worth Watching
During Bitcoin’s Bullish Momentum 📈

All eyes have been on Bitcoin as it’s just shy of making a possible new all-time-high.

With Bitcoin’s price moves, have come some stocks that have acted as a proxy: Bitcoin miner stocks.

Some popular Bitcoin miner stocks like MARA (Marathon Digital Holdings), RIOT (Riot Platforms Inc), and CLSK (Cleanspark) have seen some impressive gains of off 2022 lows in Bitcoin.

In fact, CLSK has seen a whopping 1000% return from the lows over-shadowing Bitcoin’s roughly 250% returns.

So … have the gains in the miners been had or is there more possible opportunity?

The miners as stocks, from a fundamental perspective, carry some risks.

Our very own StockGeekTV does a great job outlining the miner stocks here: Watch the video.

But, as we know from the dot com bubble and 2020, sentiment can move stocks far beyond what makes sense fundamentally.

Bitcoin doesn’t look like it is slowing down. It’s already up 35% year-to-date (and the year is just getting started.

With Bitcoin ETF approval, and inflows into these ETF’s continuing to grow, things could get nuttier.

One of the opportunities we’re watching in our Wealth Building Community is the chart MARA.

It’s setting up for a possible multi-year breakout AND sports a higher short interest which could keep buying momentum going (short squeeze).

It’s today’s trading opportunity to watch.

Other miners like RIOT that haven’t seen multi-year big technical zone breakouts could also be worth a watch.

Of course, there’s no guarantees that the miner stock breakouts will play out (this will likely require Bitcoin’s momentum to continue).

Also, these stocks are notorious for raising capital to keep funding losses (negative free-cash flow), so, they could easily issue more shares. There are truly some fundamental issues including the upcoming Bitcoin halving reducing block rewards.

However, if you’re bullish on Bitcoin from here, this could be a way to get exposure to the momentum from the stock side.

Want to trade & invest alongside us and get access to our market and stock research? Join our Wealth Building Community!

Food For Thought 🧠

"To avoid criticism, do nothing, say nothing, and be nothing.”
- Elbert Hubbard

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DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.