The latest correction from cryptos highlighted one thing above all else—retail was too confident.
When Bitcoin was at $60,000, 99% of crypto Twitter was calling for $80,000 as if it was guaranteed.
I have every confidence that Bitcoin will get back to those levels and continue higher, but the last few weeks didn’t have to be as painful as they were for many.
When you’re too confident, you fail to plan. A lack of a plan means you aren’t taking a profit. Not taking profit triggers emotions and stress during volatility.
It’s a vicious cycle but an easily avoidable one.
In today’s issue, I’ll discuss the importance of taking profit on the way up, including a simple profit-taking strategy. We’ll then get into some charts, including the S&P 500, Bitcoin, and VeChain.
Let’s get it!
My Biggest Grievance With Crypto Twitter
Crypto Twitter, or CT for short, is a fantastic place to learn.
However, it can also be a rather brutal and unforgiving environment, especially when it comes to the topic of taking profit.
There’s a cult-like belief on Twitter that those who take profit don’t believe in a project, even if you only take a partial profit.
Interestingly, this belief only exists in crypto and penny stocks.
Nobody cares if you book profit on your Apple or Tesla positions. If anything, you’ll be congratulated for turning a profit on your investment.
But heaven forbid you take 10% or 20% profit on your VETUSD position after being up 1,000%. Do that, and you’re quickly labeled a non-believer.
Here’s my take on that…
Booking at least partial profit on the way up allows you to stay in the game and continue to support various projects.
It’s a survival strategy, not a sign of weakness or lack of support.
Remember this the next time someone on Twitter tries to shame you for booking some profit.
Know Where You’re Getting Out Before You Get In
Think about the last time you took a road trip. Did you know where you were going before you set off?
Of course, you did!
Unless you’re the rare type that likes to drive aimlessly around your country, you knew your destination before you got in the car. You had a plan!
Navigating the markets is no different.
Sure, your trades and investments won’t always work out how you had planned, but that’s outside your control.
What’s within your control is having a plan and sticking to it.
The key is to take a partial profit on the way up. This accomplishes several things.
- It puts cash in your account to reallocate later if you so choose
- It helps rebalance your portfolio
- It reduces stress and emotions, especially during times of volatility
I want to focus on number three for a moment.
When it comes to reducing stress and emotion while investing, most probably don’t think about booking profit as a preferred method.
The most common way to keep emotions at bay is to risk that which you can afford to lose.
While that’s absolutely spot on, taking some off the table when in profit is another incredible way to reduce some of the stress you feel on volatile days.
In crypto, it’s not uncommon to experience gains of 500%, 1,000%, or greater.
A $1,000 initial investment may not cause you much heartache when the market starts to bounce around.
However, when that $1,000 quickly balloons into $10,000 or $20,000, those same fluctuations will have your nerves dancing.
Taking profit is about more than making money. It’s about rebalancing your emotions so you can stay in the game. And those who remain in the game the longest make the most.
Keep It Simple
There’s no need to have an elaborate take-profit strategy.
Something as simple as removing your initial risk is beneficial and will put you ahead of 99% of the market.
Let’s assume you bought $10,000 worth of VET at $0.01.
At $0.05 or maybe $0.10, it’s probably a good idea to think about removing the amount you put in. That makes the remainder a risk-free trade in a sense.
In the case of VET, ten cents was and still is a key level on the chart, so booking profit there on the way up made sense for many investors.
You can also take a more discretionary approach, which is what I do.
It involves taking a partial profit when the market goes parabolic, which happened to VET during the first half of April.
I even commented on Twitter that the rally to $0.28 was likely to fail. It wasn’t a popular opinion, but it turned out to be true.
I was taking some profit during that parabolic run because I know from experience that they tend to serve as blow-off tops.
Regardless of the method you choose, I urge you to plan to book profits on the way up before you get in.
You’ll be a much better (and more relaxed) investor if you do.
S&P 500 (SPX500USD)
The S&P 500 slipped on Wednesday ahead of the FOMC press conference.
I mentioned on Twitter how the market broke below the May trend line near 4,245 before the event.
I also discussed how over extended the market is in Tuesday’s newsletter, and how that could translate to lower prices in the coming days.
However, the MUCH larger support area extends from 4,185 to 4,200. The reason for the variance is it depends on whether you’re viewing a log or linear chart.
I’ll use 4,185 to stay conservative.
A daily close below that will be the technical catalyst for a 5-10% correction for stocks. That would put more pressure on an already vulnerable crypto market.
The alternative would be an S&P that continues to churn higher toward 4,350. Although, it would need to take out the May trend line at 4,250 to do so.
Total Crypto Market Cap (TOTAL)
Still no directional cues from the total crypto market cap.
The market has been stuck in a sideways range since Bitcoin plunged lower on May 19th.
That said, the crypto mcap is approaching the intersection of the lower parallel and the $1.8T horizontal level, so it’ll be forced to decide soon enough.
Until then, expect more sideways action.
Bitcoin lost ground on Wednesday after failing to break $41,000 on Tuesday.
I’ve discussed this resistance area between $41,000 and $43,000 at length in recent weeks. It’s going to take a daily close (8 pm EST) above $43,000 to confirm the break and open the door to $47,000.
BTCUSDT is still well above the recent trend line, near $37,000. That’ll be support if the market dips later this week.
The waiting game continues.
The VET chart doesn’t look great.
Last week, I discussed how another leg lower from cryptos could target $0.04 for VETUSDT. We haven’t seen anything close to that yet, and maybe we won’t.
However, buyers still have a lot of work to do.
The market continues to hover above $0.10 support on weak volume. A close below that area would expose $0.085.
If we do see the market surge higher from here, keep an eye on $0.155. That’s the next key resistance level for VET, followed by $0.175.
The Litecoin chart is days away from breaking out.
In fact, the terminality of this pattern suggests a breakout by June 20th.
I’ll be interested to see which way this breaks as it could serve as an indicator for the rest of the market.
That isn’t to say LTC leads the market, but rather a break from such a clean pattern could be helpful to determine sentiment.
The height of the symmetrical triangle below suggests a $100 move in whichever direction the market breaks.
A break lower would target $65, while a break higher would open up $275.
Keep a close eye on Litecoin.