Author: Andrew Packer

Cryptocurrencies

Data Driven Investor: 5 Key Steps that Will Get Ethereum to $8,000

Posted on by Andrew Packer

While the crypto space hasn’t attracted much interest compared to 2021, prices have been moving higher this year. Bitcoin is up over 70 percent. And Ethereum has been trending higher as well.

There are several developments in the crypto space that point to higher returns moving forward. Some of them relate to crypto as a whole. But Ethereum also has some specific opportunities that could send prices soaring.

One specific opportunity for Ethereum comes from the rise of sharding. That’s the name for the solution to scalability. Ethereum is moving forward with parallel processing and other tools to improve the network capacity.

That should allow the protocol to handle far more transactions, making the Ethereum network more valuable. And it should keep Eth ahead of other challengers in the space.

Ethereum can also benefit from the rise of new applications in the crypto space. One such application is gaming. Crypto tokens can be used in gaming by incorporating unique digital assets into a game experience.

While still in its early stages, Ethereum would benefit as the lead network for decentralized protocols. The total size of the crypto gaming market is small at under $5 billion in 2022. However, it’s expected to grow by nearly 70 percent annually through 2030.

 

To read the three other catalysts for Ethereum, click here.

Technical Analysis

Tastylive: Averaging 63% Returns When Stocks Do THIS

Posted on by Andrew Packer

Traders and investors may look at the same asset, but through a different lens. For a trader using options, understanding the overall market measures such as market volatility can play a key role.

That’s because volatility impacts options prices. And it could mean getting into a trade that could lose, even if the underlying asset starts to move in the right direction.

Market volatility is measured by the VIX, or volatility index. Historically, it trades between 17-20 on average. But over the past few years, volatility has been lower than average. It took September’s market selloff just to get the VIX to 20.

Investors looking to sell options, such as covered calls or put sales, should look to sell when volatility is high. That’s because rising volatility raises the prices of options on average. Declining volatility does the opposite.

Those looking to buy options should look to do so when volatility is low. That can provide an extra boost.

Overall, increasing volatility can mean a higher return on capital for options investors. That’s because higher returns are profitable.

And higher option volatility can mean investors can make a profit while making fewer trades. That can reduce the capital needed to earn an expected profit.

 

To view the full data behind the role played by market volatility, click here.

Income investing

StockMarket.com: 3 Utility Stocks to Watch in the Market Today

Posted on by Andrew Packer

The market’s focus on bond yields in the past few weeks has led to a selloff in many interest-rate sensitive stocks. That’s because some stocks trade similarly to bonds. They tend to offer slower growth, but the steady payout of a dividend.

In the stock space, utility stocks tend to act the most like bonds. That’s because regulations provide the companies with a fixed profit. However, there are parts of the utility business that can grow.

With interests including electricity, natural gas, water, and sewage, utilities can grow if their service area grows.

And they can grow by providing ancillary services as well. But overall, they’re best known for their stability across the economic cycle.

That provides steady income. With interest rates rising, utility prices have dropped to reflect the competition of higher bond yields.

One of the hardest hit stocks is NextEra Energy (NEE). The company is a leading electricity provider in the rapidly-growing Florida market. They’re also a big player in green energy production from wind and solar.

Shares have dropped over 25 percent in the past year, but appear to be coming off of extreme lows from earlier in the month. At present, shares yield 3.4 percent, and the company’s growth can lead to a higher dividend payout.

 

To read about the other two opportunities in the utility space now, click here.

Income investing

DoubleLine Capital: Finding a Bottom in Bonds

Posted on by Andrew Packer

Bond yields have been driving the stock market in recent weeks. Since June, bond yields have risen by 100 basis points on average. That’s Wall Street speak for a 1 percent move. That kind of move in yields is massive.

And as yields rise, prices fall. The bond market is on track to see its third down year in a row, following big losses in 2022 and small losses in 2021. This will be the first time in history for a three-year decline.

10-year U.S. bond yields just rose over 4.9 percent, the highest level in over 15 years. Part of the move may come from the fact that markets are saturated with U.S. Treasuries.

The U.S. doesn’t just have over $33 trillion in debt. The country is also running a $2 trillion deficit this year. That’s the largest peacetime gap in real terms and as a percentage of GDP. Higher yields entice borrowers to buy Treasuries. But it does mean pain for existing bondholders.

Those who hold bonds to maturity won’t lose money. But bond prices have to drop to reflect higher yields, which will show up on brokerage statements.

However, with inflation declining and the economy slowing, it’s likely that bonds may be near a short-term price low. And the potential for rate cuts in 2024 could lead to a strong reversal year for bonds. 

Long-term investors may want to start buying now, and traders should look to profit from rising bond prices next year.

 

To view the full analysis, click here.

Commodities

FX Evolution: The Last 3 Times This Happened We Saw a 30% Move…

Posted on by Andrew Packer

When an asset class gets heavily oversold, it can become susceptible to a short squeeze. That’s when those who sold the asset short start to get burned by rising prices. They have to buy to close their position.

But there may not be enough supply available without moving the price far higher. Investors on the right side of a short squeeze can make a big profit in a short period of time.

While investors may be familiar with the squeeze concept from meme stocks like AMC Entertainment (AMC) or GameStop (GME), it can occur in bigger stocks and even entire asset classes as well.

Currently, bond yields have soared as prices have dropped. Bonds have gotten heavily oversold. And gold prices saw a big jump higher at the end of last week, after getting heavily oversold.

And after September’s slump, stocks saw a big reversal higher that could continue into the end of the year.

Gold could be the most susceptible to a further squeeze, with the potential for a 30 percent rally. That’s because institutional investors were net short gold going into its first squeeze higher.

Either way, assets are on track for strong year-end performance. Investors can buy stocks at a discount, bonds at their highest yields in decades, and also see a potential jump in gold to new all-time highs.

 

To view the full analysis, click here.

Commodities

Bitcoin Magazine: The Bitcoin-Gold-China Connection

Posted on by Andrew Packer

Over the past few years, investors have looked for places to hedge against the impact of inflation. Historically, that’s come from gold. However, more recently, Bitcoin has attracted investor capital for the same reason.

Both are similar right now. The global gold supply increases about 1.7 percent annually from mining. The Bitcoin supply increases by about 1.8 percent right now. But Bitcoin will undergo its next halving in April 2024, which will lower its future supply increase.

During the recent market volatility, Bitcoin held relatively steady, and even trended slightly higher. Gold, however, sold off.

This decoupling indicates that some investors were selling off gold on concerns that a declining market would also mean lower gold prices.

Another suggestion is that China is selling some of its gold holdings. By selling gold instead of dollars, China can raise capital and protect their currency from fluctuating too much in global markets.

China may be facing a dollar shortage. Selling gold instead of Yuan or U.S. Treasury holdings may provide financing at a critical time.

With bond yields peaking last week and starting to come down, “risk” assets such as stocks are likely to move higher. So is crypto. And investors may want to add to their Bitcoin holdings ahead of the next halving.

With fear in the market coming down, gold prices may now start to lag further in the months ahead.

 

To read the full analysis, click here.

Income investing

Tastylive: How Pros Are Trading a Collapsing Bond Market

Posted on by Andrew Packer

At the height of the pandemic in 2020, investors panicked. They moved so much money into bonds that 10-Year yields hit an all-time low of 0.3 percent. Today, that yield is closer to 4.6 percent.

Overall, the bond market has dropped nearly 46 percent over the past three years. It’s one of the largest bond market drops in history. The past few weeks alone saw a meltdown that pushed the drop to levels seen in the stock market in 2008.

With big moves like that, it’s no surprise that traders may want to take advantage of moves in that market.

One way to do that is with the iShares 20+ Year Treasury Bond ETF (TLT). The ETF owns bonds with a duration of over 20 years. Long-dated bonds see the biggest swings from changes in interest rates.

Recently, investors have been taking a long position on the ETF. They expect shares to move out of their three-year bear market and make at least some move higher.

From a technical perspective, that makes sense. Last week’s bond market selloff created heavily oversold conditions. In a way, changes in interest rates mimic the move of implied volatility in the stock market.

It’s possible shares start to trend higher in the months ahead. The market’s big swing lower is now priced for a reversal.

 

To watch the full analysis and how to trade moves in interest rates, click here.

 

Commodities

StockMarket.com: 2 Oil Stocks to Watch in October

Posted on by Andrew Packer

The energy market has started to shift back into favor after lagging in the first half of 2023. Crucially, events such as OPEC production cuts and geopolitical fears are pushing prices higher. That bodes well for energy investors in the months ahead.

In the energy space, oil continues to dominate. Prices moved to $95 per barrel in September, before a swift drop to the low $80 range. Today, they’re trending higher again.

Investors don’t need to find a small-cap play. Thanks to the recent selloff, plenty of big-name energy companies trade at a reasonable price now. And they offer solid dividend payments along the way.

One of the world’s leading energy players, Chevron (CVX), is notable now. The company has global operations, reducing the risk from being in any one specific region or country. And it has diversified operations, including exploration, production, and refining.

That diversified portfolio can pay off from rising prices, as sometimes some segments such as refining are more profitable than production.

Shares are trading at just 10 times earnings, and are down about 12 percent from their 52-week highs. Chevron also pays a 3.7 percent dividend. That’s on the higher range for the energy space outside of specialty companies like pipelines.

Overall, with the energy market looking strong going into the final quarter of the year, investors may want to buy a beaten-down big name here.

 

To read the full analysis and other energy stock to watch now, click here.

 

Income investing

Dividend Growth Investor: Five Dividend Growth Stocks Increasing Shareholder Dividends

Posted on by Andrew Packer

The market selloff peaked with a drop in dividend-paying companies. Given the competition between dividend yields and bond yields, that makes some sense. But over time, dividend companies can be a better investment than bonds.

That’s because many dividend companies can continue to grow their payout over time. It’s how company management signals that the business continues to grow. And that shareholders should be rewarded for their patience in holding.

Companies continue to increase their dividend payouts, even amid the recent market turmoil.

One company that sold off heavily in recent weeks is McDonald’s (MCD). The fast food operator and franchiser just increased its quarterly dividend by 10 percent to $1.67 per share.

Over the past decade, it’s raised dividends close to 7 percent annually. McDonald’s has now raised dividends every year since 1976, or 47 years. Today, shares yield about 2.7 percent.

Another company raising its dividend now is Lockheed Martin (LMT). The aerospace and defense contractor has raised its payout for 21 years now. Plus, the dividend has an average 10.6 percent increase annually over the past decade.

Currently, shares yield 3.1 percent.

The increased payouts over time mean that investors can fare better in these companies compared to investing in the fixed payout of a bond. And over time, higher dividend payouts tend to mean a higher share price as well.

Conversely, a bond is a fixed payment in, and a fixed payment back out at the end of its holding period.

 

To read the full list of companies raising dividends now, click here.

Stock market strategies

David Lin: Markets Bottom, Expect ‘Strong Rally’ Next, Then 50% Crash

Posted on by Andrew Packer

Markets are shaking off their September slump with a strong performance in the first full week of October. That’s in line with seasonal trends.

While specific dates in October stand out for big market drops, September is historically the worst months of the year. On average, October tends to see markets move higher. Markets are now on track to follow that trend in 2023.

What can investors expect from here? Given how stocks closed in on their 200-day moving average, expect a strong rally. Another factor? The fact that nearly 80 percent of stocks moved under their 50-day moving average in the recent drop.

Historically, both of those trends are strong signs of an oversold market ready to bounce.

Markets should trend higher in the coming weeks. Stocks may even make a new high for 2023, surpassing the July peak. Either way, adding to the year’s gains, stocks are on track for a strong end to the year.

Going into 2024, investors should get more cautious. The recent drop in bond prices led to soaring yields. Treasury bonds have started to “un-invert.” That’s a trend that has preceded recessions in the past.

So investors can have some holiday cheer this year. But markets may start 2024 much like 2022, where the trend moves lower over time. Depending on conditions, markets may even crash going into the end of 2024.

 

To watch the full analysis, click here.