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  • Asian Stock Markets Perform Careful Increases

    Asian Stock Markets Perform Careful Increases

    2 min read

    Asian stock markets recorded substantial increases

    • Asian stock markets recorded substantial increases

    Asian stock markets carefully raised in early trading Monday. The previous week was volatile for overall markets because the U.S.-China trade tensions escalated.

    According to Goldman Sachs, a trade deal is pretty much impossible before the 2020 US presidential election. This US multinational investment bank cautioned that the open-ended trade war has a bigger influence on the U.S. economy than expected. In a letter to investors, this bank lowered its growth forecast for the market movements. Also, it warned the risk of recession is growing. The reason behind is the companies are reducing spending which is, of course, caused by trade-war risks.

    Asian stock markets recorded substantial increases

    Yesterday, 11/08/2019 Monday, China’s central bank set the yuan lower than 7 per U.S. dollar. The value is the same for the past three days. The People’s Bank of China set the currency’s reference limit at 7.0211 per dollar. That is lower than the level on Friday. The analysts had expected an even lower point.

    According to MarketWatch:

    “Hong Kong’s Hang Seng Index HSI, -0.18%   gave up early gains and was last about flat, while the Shanghai Composite SHCOMP, +1.45%   gained 0.7%. South Korea’s Kospi 180721, +0.23%   advanced 0.4%, while Taiwan’s TaiexY9999, -0.21%   was about flat and Indonesia’s JSX Composite JAKIDX, -0.40%   declined slightly. Australia’s S&P/ASX 200 XJO, +0.09%   was little changed. Markets in Japan and Singapore were closed for holidays.”

    Some individual stocks like Sunny Optical and Tencent raised in Hong Kong, but HSBC 5 fell. Samsung and SK Hynix increased in South Korea, in contrast to Rio Tinto that slipped in Australia.

    President Donald Trump statement

    The increases in Chinese stocks followed the U.S. President Donald Trump statement on Friday that he is “not ready to make a deal.”

    “China wants to do something, but I’m not doing anything yet,” Trump told Breitbart. “Twenty-five years of abuse. I’m not ready so fast.”

    In Trump’s opinion, as he said, it would be “fine” if the negotiation between the two countries planned for September, were “called off”.

    Meanwhile, China fixed currency’s reference limit at 7.0211 per dollar which is lower than the 7 expected value.
    Some very important data will come on Wednesday from China.  On the first place, information on industrial production, retail sales,  and the jobless rate.

    That will be interesting because Cathay Pacific Airways Limited (HK:0293) fell more than 4% just because China blamed it that its employees participated in anti-Beijing protests. Well, the pilot is suspended.

    There is Huawei too

    President Trump told CNBC that the U.S. administration will not have any relations with Huawei as the trade war proceeds to increase.

    “We are not going to do business with Huawei. … And I really made the decision. It’s much simpler not doing any business with Huawei. … That doesn’t mean we won’t agree to something if and when we make a trade deal,” Trump told CNBC.

    Speaking about Asian stock markets we cannot avoid Chinese tech stocks.

    The accepted opinion is that they should lag the rest of the market. That opinion supports Ari Wald, head of technical analysis at Oppenheimer.

    “We think the opportunity is on the U.S. side — U.S. tech — and we think the risk is in China tech,” Wald stated on CNBC’s “Trading Nation. ” and added “the S&P 500 is breaking out to the upside. We see this as the resumption of U.S. leadership.”

  • Gordon Growth Model – Mathematics of Trading

    Gordon Growth Model – Mathematics of Trading

    5 min read

    Gordon Growth Model

    by Gorica Gligorijevic

    The Gordon Growth Model is useful to determine the intrinsic value of a stock and you will see how. It is all math.
    Anyone who wants to be a profitable trader has to know math. Profitable trading is not about feelings, or prophecy and stock advice or picks. It is all about math. Yes, the main goal is to earn money more than lose.

    But trading guessing is not a good idea. The math generates success and luck in your trading. Do you want to know how the math works in your attempts to profit and be a successful trader?

    If you want to act like a pro you have to be able to explain and make the math behind your trading. Anyway, you might benefit from understanding the math behind the stock market.

    At least, you have to know the basic calculations. 

    Traders-paradise wants to show you some simple to understand. It will help you to pick the right stock and keep your hopes of future returns more realistic.

    Let’s first determine the intrinsic value of stocks. How to do that? Just use of the Gordon Growth Model. Oh, yes. You will need more explanation.

    The Gordon Growth Model is known as the dividend discount model or DDM but without the current market stipulations, meaning the factors that influence the market, such as competitors, business challenges, etc.

    The point of this Gordon Growth model is to relate the current intrinsic value of stocks to the value of a stock’s future dividends. This is a very old model but still actual and popular. The equation shows that the long-term real return from the market should be almost equal to the inflation, modified by the compound yearly growth rate in dividends and increased by the current dividend yield. 

    Let’s view this complex definition in a simple example.

    The S&P 500 real growth rate in dividends has been around 1.3% per year over almost a hundred years. At the same period, the dividend yield was 5% annual. What you have to do is to sum these both. The sum you get is a bit less than actual 6,5% compound annual return from stocks for that period.

    This is defined by an almost doubling of the PE ratio, called a speculative return. That was exactly what did add the stock returns.

    Let’s see Gordon Growth Model and how to calculate it.

    As we said the value of a stock is shown as 

    Stock’s value = D1 / (k – g)

    where D1 represents the expected annual dividend per share for the next year k is the investor’s discount rate of return. You can estimate this using the Capital Asset Pricing Model, for example.

    and g is the anticipated dividend growth rate. We take this as a constant.

    When you have all these parameters, it is so easy to calculate the intrinsic value of the stock. For example, the S&P 500 dividend yield is about 2 %, 4.5% is how much you can expect dividends to grow due to the historical performances. So you can expect a long-run return at 6.5%.

    To show you how this model is true whether or not a company pays a dividend or reinvests it let’s show you this real example.

    Suppose your preferred company plans to pay a $2 dividend per share next year (D1). Also, you expect an increase of 10% per year following (g). Also, suppose you are expecting a rate of return on the stock to be 20% (k). Let’s say, the stock is trading at $20 per share now. Using the Gordon Growth formula, you can determine that the intrinsic value of one share of the stock is:

    $2.00/(0.20-0.10) = $20

    When you have all these parameters, it is so easy to calculate the intrinsic value of the stock. 

    You will very often find the Gordon Growth Model formula calculated:

    P = D1/(r-g)

    The stock price (P) is equal to the anticipated value of the dividend (D1) divided by the difference in the investor’s rate of return (r) minus the constant growth rate of the dividend (g).

    In essence, the Dividend Growth Model utilizes the investor’s required RoR and the dividend growth rate to calculate the value of the stock. 

    But dividends will increase at different percentages. For example, dividends will grow quickly and then reach a steady rate. The dividend is still supposed to be $2 per share next year, but dividends will progress yearly by 14%, then 20%, then 24%, and then stable rise by 10%.

    By using components of this formula, but examining every year the recent dividend growth individually, we can determine the current value of the stock.

    Following the inputs for our example Gordon Growth Model formula shows:

    D1 = $2.00
    k = 10%
    g1 (dividend growth rate, first year ) = 14%
    g2 (dividend growth rate, second year) = 20%
    g3 (dividend growth rate, third year) = 24%
    gn (dividend growth rate every year after) = 10%

    Let’s calculate the fair dividends for those years (we already find the dividend growth rate):

    D1 = $2.00
    D2 = $2.00 * 1,14= $2,28
    D3 = $2,28 * 1,20 = $2,74
    D4 = $2,74 * 1,24 = $3,40 

    The next step is to calculate the current value of every single dividend during the extraordinary growth period:

    $2,00 / (1,20) = $1.67
    $2,28 / (1,20)^2 = $1.58
    $2,74 / (1,20)^3 = $1.59
    $3,40 / (1,20)^4 = $1.64

    Now we can calculate the dividend in the year of stable growth of 10%:

    D5 = $3.40 * 1.10 = $3.74 

    Further, we can use the Gordon Growth Model’s formula to calculate the value of dividends in the 5th year:

    $3.74/(0.2-0.1) = $37.40

    This allows us to calculate the present value of the dividend’s growth in this 5th year, or how much that future growth is worth to us today:

    $37.40/(1.10)^5 = $23.22

    The final step is to calculate the current intrinsic value of stocks by summing up the present value of dividends in the first four years and the value of dividends in the fifth year.

    1.67+1.58+1.59+1.64+23.22=$29.7

    The main benefit of this formula is that it may cool down your emotions when trading. Calculating this can bring you down to the ground in growth periods, and also can support you when the market is falling.

    So, can the Gordon Growth Model’s formula predict the future market returns? In short, yes. 

    But the weakness of the Gordon growth model is its hypothesis that there will be a constant growth in dividends which is rare. So, you can use this formula for companies with stable growth rates.

  • Why Zero Bond Yields Happen

    Why Zero Bond Yields Happen

    Why Zero Bond Yields Happen
    Bond yields in high-level markets are declining for the last 20 years. What is happening with negative or zero bond yield?

    By Guy Avtalyon

    Zero bond interest rates mean that the yields of the bonds are 0%. This indicates a monetary policy that aims to stimulate the economy but is approaching its short term limits as the short term interest rates can’t be negative. This situation indicates that monetary-policy makers and markets see increased deflationary pressure on the currency of the country.

    This leads to long term bonds’ interest rates to be negative. For example, in Germany the ten-year bond yield is negative, it is minus 0.02 percent. Actually, $13 trillion worth of bonds is giving negative rates. This interest rate will be accruing nominal losses to investors until 2030.

    In Japan, low-interest rates on a bond are predicted to stay zero or negative even longer. The 10-year bond yields in the US are a bit above 1% and the UK about 2.4%. Both countries suggest a minimum or no tendency of raises in the near future.

    Moreover, bond yields in high-level markets are decreasing for the last 20 years which was unbelievable just 2 decades ago.

    Why zero bond yields happen now?

    The financial crisis in 2008 loan growth shifted negative and continued to be depressed for a long time. It happened because households and companies had too much debt and they wanted to pay down debt. They wanted to have no debts even when the central banks started cutting the interest rates closer and closer to 0%.

    The same case was seen in Japan in the 1990s during the Lost Decade.

    Bonds interest rates are market prices, meaning they are a measure of the supply and demand of bonds. The demand is driven by a desire for low-risk assets. And bonds are a less risky asset than stocks because they offer fixed payments for an exactly fixed time. The bondholders will take something even if the country or company that issued bonds experience the crash. The interesting thing about bonds is that the riskier bond is, the pay-out is higher because investors are compensated for accepting the higher risk.

    Today, the bonds are less risky than ever. The investors are buying bonds with lower yields. Low-risk assets are exceptionally good-looking when markets are unpredictable or uncertain. For example, today in the US you have investors worry that a recession caused by a trade war with China could crash the stock markets. 

    That’s why even negative bond yield rates are more desirable than the other choices.

    Moreover, pension funds usually are buying bonds, no matter how high or low is the rate. Either from prudency of fund managers or the regulation. For instance, German pension funds hold bonds more than other assets because they can invest only 35% in risky securities.

    How does this impact your investments?

    Well, it depends on what is your outlook as an investor, meaning are you, borrower or saver. That will determine your benefit from zero bond yield.

    Low rates can be very bad for retirees. They more often hold more bonds. Retirement investment expenses have grown amazingly costly. Baby boomers may have profited from economic increase and growing stock markets. But their retirement is much more costly also. Anyway, savers and pensioners are punished when the nominal value of their investment falls.

    Actually, everyone will get a lower return on investments, or be forced to take more risk to generate a higher return. 

    If stock prices decline that will cause more economic instability. On the other hand, a lower cost of capital can boost investment and push more growth. That will be the benefit of everyone. And this possibility is the driver behind the policy of cutting interest rates by central banks.

    Why a zero bond yield is bad? 

    If the price is zero, savers will accumulate less and get less return on prior savings.

    Imagine this deal as an example of zero bond yields. You borrowed to some company $1,000 today and it will return $900 or $1,000 with no interest rate to you in a decade.
    What?
    This is exactly what is happening with negative or zero bond yield. That is not how it should work. You have to make a profit when you put your money in the market or the bank.

    Nicholas Colas, the co-founder of DataTrek, explained: “Bonds are supposed to pay the owner of capital something to pry the money out of their hands.”

    But, some really wise investors have invested almost $15 trillion in government bonds that offer negative interest rates, per a report of Deutsche Bank. That is approximately a quarter of the overall bond market.
    Negative interest rates of long term bonds in a situation of the zero-bound interest rates allow politicians to give more promises waiting the day when interest rates return to rational levels, and taxes rise to pay for it all.

  • Binance Security Warning For Its Crypto Users

    Binance Security Warning For Its Crypto Users

    2 min read

    Binance Security Warning For Its Crypto Users

     

    Binance security warning was issued for crypto exchange users. The world’s largest cryptocurrency exchange warned users that they are investigating the possibility of leaking of verification data, reported Forbes. That could hit up to 60,000 users who gave personal identification data to Binance during the last year, also Coindesk reported.

    According to Binance security warning, a hacker announced to hold 10,000 photos of users that have some connections to the exchanges know-your-customer data. KYC is a legal demand by financial companies to prevent money laundering and fraud. It is an obligation for all customers who want to trade, deposit or withdraw funds. Every customer has to provide such information for this cryptocurrency exchange.

    The Bitcoin and cryptocurrency exchange, which is based in Malta, announced it was blackmailed by the hacker. The hacker was demanding $3,5 million worth 300 bitcoin. Binance revealed the “inconsistencies”. They compared the hacker’s data to the data in its system, and found “no evidence has been supplied that indicates any KYC images have been obtained from Binance.”

    How the leaking was revealed

    This data was distributed on an unnamed group on app Telegram. Binance’s reaction isn’t surprising: “by joining or spreading the link of the Telegram group, you are helping malicious hackers (at least giving attention). What we should do as an industry is to fight them. Stay on the positive side. Report the group, then leave.”

    Binance Security Warning

    Binance has offered a 25 bitcoin prize worth $290,000 for the information that could reveal the hacker’s identity. 

    Security warning for crypto exchange is not rare

    Bitcoin exchange hacks and security cracks are not so rare. Still, it is a relatively common problem. Exchanges are working on fixing that issue but the success isn’t always the best.

    One of the problems is that the bitcoin price always drops when it comes to a situation like this one. Losing users data is an enormous problem. The security is most important for every single crypto exchange if they want to keep their coins safe and have more customers.

    Binance is under hacker’s attack and blackmailed as well.

    So, the arising question is if such an exchange, the world’s largest by trading volume, is hacked and has a security problem, what we can expect from the smaller ones?

    Binance has engaged a third-party

    The most surprising fact is that hacker didn’t hack Binance’s system to collect data. According to a statement by Binance CEO CZ, the data was collected from an outsourced company.

    The leaked data is linked to an engaged company. Last year Binance outsourced some company to handle user data sent through the KYC system.

    The consequence of a security problem

    The data leak could force users,  back to use sites that allow them to obtain cryptocurrency but without giving any personal data, or at least the minimum of it.

    Data leaking was already a problem to Facebook, Yahoo, Capital One Financial Corp. We experienced it.
    Crypto exchanges are hacker’s targets for a long time. Sometimes they would require coins, sometimes they would collect customers personal data. During the past 10 years, almost $1,5 billion has been stolen.

    What all users of cryptocurrency exchanges want is to be anonymous and safe as much as their coins. That’s all. The exchanges must guarantee that. Otherwise, the nature of crypto will be damaged.

  • Difficulty Ribbon – The right time to buy Bitcoin

    Difficulty Ribbon – The right time to buy Bitcoin

    Difficulty Ribbon - The right time to buy Bitcoin
    When is the best time to buy Bitcoin?

    By Gorica Gligorijevic

    Willy Woo, who is an on-chain metrics analyst tweeted that Bitcoin’s current charts showed Difficulty Ribbon. That indicator, according to him, points the best time to buy Bitcoin. The ribbon is composed of moving averages on Bitcoin mining difficulty.     

    “When the ribbon compresses or flips negative, these are the best time to buy in and get exposure to Bitcoin.”

    Difficulty Ribbon also gives information on the rate of change in difficulty. According to Willy Woo, this is the sign that Bitcoin will never be at $6,000 again. 

    The volatility of Bitcoin is really terrifying for most people. Daily movements are something that only rare and good nerves can handle.  Hey, Bitcoin jumped 20% during one weekend! At the same time, it is so impressive and exciting. Bitcoin dropped for more than $1,000 but it recovered again. What a character indeed! Of course, volatility is the nature of BTC.

    But Woo is providing us a deeper insight. 

    The difficulty Ribbon indicator shows the best time to buy Bitcoin for the long-term.

    If you open your eyes you’ll be able to see it too. for a moment and you’ll see the bigger picture. The chart that Woo shared on Twitter clearly shows the ‘ribbon difficulty’ indicator. Historically it has predicted the best times to get exposure to bitcoin during the past ten years.

     

    This is that great moment. The chart shared by Woo, shows how the difficulty ribbon packs and turns overall negative result? It is obvious in the chart where the dark line passes above the weaker lines. This trader explains. He is expecting a Bitcoin miner capitulation next year. That will halve the supply but “add more fuel to the bull market,” as he tweeted. The point here is that reduced numbers of Bitcoin will give more power to this bull market. The BTC price will go up so, this is the right time to buy and hold it.

    What is the Difficulty Ribbon?

    The ribbon chart moving averages on mining activity, letting us see the variation in bitcoin mining difficulty. It also illustrates how bitcoin mining changes the BTC price.

     

    How does Difficulty Ribbon work? 

    When the new coins are mined, miners are selling some of them to cover the costs of mining. That results in a bearish price squeeze.
    The smaller miners have to sell more to continue producing. But, after some time it grows unsustainable, and they capitulate. So, after that happen only the powerful miners are in the scene. The hashing power and network problems are lessened (that is ribbon compression) and the powerful miners will sell fewer coins to cover costs. That provides more space for bullish price movements.

    When this indicator is visible?

    This indicator is visible at the end of bear periods and after miners capitulation. That is the time when miners lessen their selling demands which allow Bitcoin price to resolve and then rise more.

    Miners capitulate in bear periods. But it can happen when they mined only half the coins for the costs of the full mining and the Bitcoin market price didn’t achieve that level yet. The compression is visible after each halving in producing as there are fewer miners.

    The first who described the Difficulty Ribbon indicator was Vinny Lingham in 2014. So, it was 5 years ago. Now, we have 10 years of historical data. Long enough to make sense to predict that this is the right time to buy and hold Bitcoin at least until next year. According to the Difficulty Ribbon indicator in the charts.

  • Pound falls on the UK PM’s threats

    Pound falls on the UK PM’s threats

    3 min read

    Pound falls on threats of "no-deal" Brexit

    • GBP reached a record low against the Euro.
    • Pond falls against the US dollar too.

    Boris Johnson, the new UK Prime minister refused to reconsider his threat to leave the European Union with “no-deal Brexit”. This decision already has a negative influence on the pound and pound falls.

    GBP reached a record low against the Euro.

    Pound falls

     

    But the pound falls and GBP is under great pressure according to latest reports. It fell against the US dollar too.

     

    Pound falls on threats of "no-deal" Brexit

     

    The pound-to-euro exchange rate is quoted at 1.0853, the pound-to-dollar exchange rate at 1.2161. This level wasn’t noticed since October 2016. The date when former Prime Minister Theresa May declared her plan to trigger divorce from the EU. It is a clear sign that sterling fell to an almost-three-year low as no-deal Brexit worries rise. And now, pound falls more.

    Johnson “isn’t bluffing”

    The ‘no deal’ Brexit will happen on October 31. The reports came after a meeting on Monday between European Commission officials and Brexit diplomats.

    The Guardian and The Telegraph cited unnamed EU diplomat who said that “no deal’ Brexit appears to be the UK government’s “central scenario”. Both media reported the EU is taking this situation as “[their] working hypothesis is ‘no deal’.”

    The investors are worried about Johnson’s stance. His “no-deal Brexit” thinking isn’t a good signal for them. Rehan Ansari, the currency expert at Caxton FX, commented for Express.co.uk the current exchange rate developments.

    “The data, however, was not enough to get the Pound off the back foot. GBPEUR printed a new low at 1.0819, a level not seen since August 2017,” pointing out that “any volatility will likely be influenced by politics”.

    The market expectations

    The market expects a ‘no deal’ Brexit scenario, it is obvious. The forex strategists are seeking to set the levels that the British pound might be aiming. Some of them gave some numbers and found an alternative answer. Forex strategist Jordan Rochester said the GBP will settle at “hard Brexit equilibrium”. This is recognized as the level where the UK’s accounts would begin to balance themselves.

    The main issue for the UK is that it is reaching a historically high deficit. In the first quarter of this year, it was at -5.6% of GDP. The consequence is that the UK imports goods and services more than it exports. That is an outflow of currency.

    But there are some optimistic opinions. For example, Robert Halfon, a conservative politician, has faith that the drop of the pound will give more profit to exporters and boost British tourism. 

    “Hopefully holidaymakers will choose GB as a holiday destination,” he stated. Britons think it would be nice if it would be the truth. The truth is that leaving the EU may have a bad influence on the UK economy and national currency. But there is almost no chance for that to happen, as it is evident from Bank of England’s predictions of 1-in-3 chances for post-Brexit recession.

    Clearly Departing

    Johnson said many times that he’ll lead the UK out of the EU on Oct. 31. With or without a deal. Moreover, he has directed government departments to develop the plans for this divorce from the EU until the Halloween deadline. Johnson personally is going all over the country searching for wider support for his plans. 

    “If they can’t compromise, if they really can’t do it, then clearly we have to get ready for a no-deal exit, and I think we’ll do it,” Johnson said. “It’s up to the EU, it’s their call.”

    The investors’ concerns

    If the UK leaves the EU with a ‘no deal’ the country could be faced with dry-out of investment capital. The investors are cautious, and they could leave the pound ‘high and dry’.

    The UK internal capital depends on outside capital. But the balance may be established. If pound drops more that would decrease the incentives to import. At the same time, it would increase the incentives for export. Hence, achieving a balance.

    The pound falls as markets raise expectations of the new political risks and a ‘no deal’ Brexit on October 31.

  • Woodford fund is in trouble

    Woodford fund is in trouble

    2 min read

    Woodford fund is in trouble

    The financial services company from Bristol will have to come up with answers about their continuing support for Neil Woodford’s troubled fund when they publish the half-year earnings report on Thursday, August 7.

    One week after the administrators of the Woodford Equity Income Fund, Link Asset Services, have announced that the troubled fund may stay shut until early December, trouble is brewing for Bristol’s retail investment giant, Hargreaves Lansdown. According to the Times of London Crag Newman, co-founder of Neil Woodford’s company is secretly selling his two multimillion pounds worth properties. The troublesome week for a former darling of the retail investment industry, Woodford, is creating some problems for other big players.

    Woodford is no more retail investment darling

    Hargreaves has already brought on itself scrutiny for continuing recommendation of Woodford’s fund until the very last day, June 3, when the fund was suspended following a prolonged period of poor performance during which it shrunk to just £3.5B from its peak of over £10B. That suspension affected around a quarter of Hargreaves customers, leaving them with their funds locked up for what now seems to be as long as six months. Now, the Hargreaves customers are bound to continue paying fees through the period they may not have wished to hold on these investments. According to the Financial Times, the CEO of Hargreaves Lansdown, Chris Hill, has issued an apology to their clients and waved its 0.45% fee to their customers on funds frozen in Woodford’s equity fund.

    Warning on Woodford fund 

    On Thursday, analysts are expecting that Hargreaves reports a 5% rise in pre-tax profits and an 8% rise in revenues. But that report will encompass only one month of the fallout from the Woodford fund’s malaise. Some, such as Gurjit Kambo of JP Morgan Cazenove, is warning their clients that deposits in Hargreaves are likely to be negatively impacted by developments relating the Woodford’s fund.

    “With investors in Woodford’s equity income fund still gated, and the relationship between Woodford funds and Hargreaves Lansdown under increased scrutiny, we have reduced our inflow estimates,” Kambo said in a note to clients.

    His estimates of Hargreaves’ new funds for 2020 have gone from £7.9B to £5B, and from £9B to £5.5 in the following year.

    Analysts of the Deutsche Bank argue that Hargreaves shares have taken enough of toll to account for the fallout from Woodford’s debacle. In mid-May, their value has peaked at £24.47 and then fell to as low as £18.59 following the freezing of the “Woodford’s Equity” fund. Since then they have recovered, with some ups and downs, to £20.43 on Friday, August 2.

    The bottom line

    But despite all these developments and conflicting opinions, a question remains. Why did Hargreaves Lansdown continue to recommend Woodford’s fund until the day it was suspended, and through its shrinking which amounted to 65% of its peak value?

  • Golden Cross is extremely powerful pattern

    2 min read

    (Updated Oct. 21)

    Golden cross explained

    by Gorica Gligorijevic

    A golden cross is a technical indicator appears when a faster-moving average crosses a slower moving average. That is the simpler explanation. More important are the moving averages which create the cross.

    To find this pattern you have to observe the 50-day and 200-day. Only these two periods are valid in forming this pattern. When you notice a golden cross happen you will something like this

     

    Golden Cross is extremely powerful pattern

     

    This pattern is an extremely powerful sign of a strong bull market. It is an uptrend and traders like when seeing this on the daily charts.

    On the chart above you can see the point where the lines of 50-day and 200-day periods touch each other and make a cross.

    Traders always see the golden cross as a Sangraal pattern. Their opinion is that the golden cross pattern is one of the final signs of a bull market. That is a definite buy signal.

    Traders-Paradise wrote about Bitcoin golden cross. But it occurs in stock trading too. For example, last time when this pattern was seen in the S&P 500 Index, the index has risen by more than 50%.

    The opposite indicator is the death cross. The death cross happens when a  50-day moving average crosses from above to under its 200-day moving average. The death cross shows a bear market going ahead. When death cross appears you will see this pattern on your charts.

     

    Death cross

     

    But our topic is a golden cross.

    This cross pattern has three explicit stages. The first stage is the point where a downtrend is but you can see it is on its last legs. Why is that? The selling interest is defeated by a stronger buying interest. More traders are willing to buy.

    The second stage includes the development of a new uptrend. The breakout of that uptrend is noted when the short-term MA crosses from below to above the long-term MA. And you can see the point of the golden cross.

    The third stage is when the new uptrend is extended, and more gains verify a bull market. During the third stage, the golden cross’ two MA acts as support levels when occurring corrective downside retracements. The bull market is intact while the price and 50-day MA stay above the 200-day MA.

    How to use the pattern

    The golden cross is useful to discover the right time to enter or exit the market. This indicator is a good tool that can help you to know when it is reasonable to sell and when it is better to buy and hold.

    When you are looking to buy an asset, it can happen to enter the market when the asset’s price increases above the 200-day moving average. Sometimes it is better than waiting for the 50-day MA to secure the crossover. How this can be better, you may ask?

    The pattern is usually a lagging indicator. What does it mean? This means it may not happen until the market has already changed from bearish to bullish. It may be used as a sign that the bear market is finished. So, it is time to exit your positions.

    The golden cross is used to trading individual assets as well as market indexes, for example, the Dow Jones Industrial Average. Also, you can use different MAs to notice a golden cross. For instance, you may use the 100-day MA instead of the 200-day. This pattern can also be viewed for an hourly chart, for example.

    The bottom line

    Some traders and market analysts don’t think the golden cross, also the death cross, are strong trading signals. The cross pattern is usually a very lagging sign, as we mentioned. The Cross pattern has short predictive importance but it is more relevant as proof of an uptrend.

  • Bitcoin’s 3-day chart shows “golden cross”

    Bitcoin’s 3-day chart shows “golden cross”

    2 min read

    Bitcoin's 3-day chart shows "golden cross"

    The last, 2018 was a bear market for Bitcoin and crypto-assets. But this year is a bull market or we can say it is the opening stages of it. Why we are saying that? 

    On the three-day chart, we can see a “golden cross”.

    A golden cross is an exactly a bullish signal. Typically it is a sign that the asset is going to start a bull run. And you can see that on the three-day chart, it is very obvious, without any dilemma.

    The golden cross is a bullish breakout pattern. It is a positive momentum indicator, happening when a security’s short-term price moving average moves above its long-term moving average. 

    Bitcoin price has triggered a “golden cross” on the three-day price chart. That causes great enthusiasm among its supporters.

     

    golden cross

     

    The golden cross is a powerful sign that Bitcoin is surely entering a bull run. This conclusion is based on past experiences, of course. So, we can understand why investors are so excited.

    The death cross is the opposite. It is the point where the short-term price moving average moves below the long-term moving average. No matter if we are talking about golden cross or death cross, the short-term moving average is regularly a 50-day moving average. The long-term moving average is a 200-day moving average.

    The similar situation we had in February 2016. At that time, Bitcoin produced a 4,900% return to investors.

    Will the same happen once again? If the golden cross stands, Bitcoin could go on to produce investors enormous returns. The majority of asset class will never bring such return.

     

    "golden cross"

     

    A golden cross is a powerful indicator that an asset’s price is going to grow. Opposite, a death cross is an indication that an asset will decline in price.

    ROI (Return on Investment) of Bitcoin was 7,870.79% on the date of 3/8/2019. At the same date, the market cap was $192,025,701,130. The 24h value was $17,827,812,399.

    Before the previous golden cross in February 2016, the Bitcoin was priced at just about $400 per BTC. But after the golden cross was formed Bitcoin brought 4,900% in returns as it hit $20,000.

    When the golden cross appears, the asset will need approximately a year and a half for that, so it might happen in December 2020. Yes, it will take some time for BTC to achieve highs above $500,000 with rising in percentage as this one is.

    Mike Novogratz states that even ordinary investors have to invest 2-3 percent of portfolios into crypto. But, he cautions that they should get “real nervous” if they see the bitcoin price drops below a key level.

    This investor had foretold that bitcoin would consolidate in a range set by $10,000-lows and $14,000-highs.

    The bottom line

    You might think that the market cap of BTC must be very massive to reach this price. Also, it is pretty impossible to see that huge return again soon. But Bitcoin knows how to surprise us. So, everything is possible.

    The moving average on the three-day BTC/USD chart is on a constant upward trajectory. This trend may stay in the future.

    Seasoned traders call this long-term bull market signal a lagging trend indicator. The moving average studies are based on historical analysis. But, we have a low capacity to predict how this asset will behave in the future since the golden cross was seen only once. All we know is that this indicator is a very powerful indicator of bulls trends.

    If history repeats, this sign will confirm that soon we will see a true record rally. The one that will go far over the previous maximum.

  • 5G Opportunity For The Investing Big Time

    5G Opportunity For The Investing Big Time

    4 min read

    5G Opportunity For The Investing Big Time

     

    It looks 5G is an investment opportunity that arrives very rare. So, it is a great opportunity for all who know how to recognize it. 

    The biggest investors are already taking their place there. They are putting hundreds of billions of dollars in cell tower companies. 

    For example, Bill Gates and George Soros. They both bought big positions in one cell tower company last year. Their example is followed by Paul Tudor Jones, Jim Simons, and D.E. Shaw. All of them rose their holdings on G5 stocks. Position Number 1 belongs to Warren Buffet, Carl Ichan, Paul Singer. They have been invested earlier.

    The overall 5G industry is estimated at almost $12 trillion. 

    And this is just beginning.

    Masayoshi Son, the Korean-Japanese investor, believes that 5G is a bigger opportunity than Alibaba. For those who don’t know, he invested $20 million buying a 30% stake in Alibaba while it was just a small Chinese company. Today his investment is worth $108.7 billion. Would you like to calculate how many it is multiplied? To add more pain in your life, over 5,000 times. That’s how much his investment has grown over 28 years. 

    And that investor said the 5G is a much bigger investment and it is “just the beginning” as he stated.

    Masa Son holds 5G is crucial for technologies like robotics and AI. 

    He’s already put $100 billion and he intends to invest $100 billion more every two years. Masa Son is investing his billions in 5G and the internet 3.0. 

    How can you position your portfolio for this 5G volcanic growth?

    You can invest in companies. 

    No, Huawei is not a choice. You cannot trade Huawei because it is fully owned by company employees. The consequence is the company is not traded on the public market. So, you can’t invest in it. But keep an eye on this global second-largest smartphone producer. 

    Qualcomm

    But you can trade, for example, Qualcomm. Its CEO Steve Mollenkopf described 5G as a technological revolution that will have a great influence on our lives. He said this wireless network “will have an impact similar to the introduction of electricity.”

    Yes, you can invest in Qualcomm.

    As we already wrote, high-tech stocks are always a good choice. 

    Qualcomm Inc. shares dropped a bit on Thursday in premarket trading.

     

     5G Opportunity For The Investing Big Time

     

    Qualcomm develops wireless communication technologies, software, and chipsets for wireless network equipment and mobile devices. Its development strategy covers 4G, 5G and Wi-Fi technology. The company is very engaged in the development of 5G. 

    Qualcomm market cap – $80.6 billion.

    Ericsson

    Also, you can invest in Swedish Ericsson. It is on the head of 5G hardware development. It participates in tests and research with mobile operators all over the world.

     

     

    With Ericsson’s 5G radio prototype you have access to 5G wireless network.  It is included in real-world tests in the United States, South Korea, Japan, and its homeland. The prototypes combine a bunch of high-tech, like a new antenna and receiver, to provide 5G to existence. Ericsson pays attention to the development of 5G technology also sings continuous improvements in its 4G LTE equipment business.

    Ericsson market cap – $26 billion.

    Nokia

    Nokia is a good choice too. 

     

    5G Opportunity For The Investing Big Time

     

    It is a Finnish telecommunications equipment and data networking company. It has begun high-level trial on new 5G access outputs.

    It is valuable for global mobile operators. At the beginning of 2016, Nokia obtained a 91.8% control stake in Alcatel, a French telecom equipment company which has own high-level 5G development program. This acquisition may have a great influence on Nokia’s 5G development plans.

    Market cap – $32.8 billion.

    The bottom line

    Cash in on the biggest investment chance since the electricity arrived. Wireless infrastructure stocks can make you rich as Midas. Just take advantage of 5G opportunity and invest in companies that are involved in developing or infrastructure. 

    The early investors already did. Don’t waste your time.