Bitcoin Is Weak — RIOT Doesn’t Care

 

If you’ve read my most recent post on Bitcoin, you know I’ve been bearish for quite some time, and that hasn’t changed. Longer-term cycles still suggest lower prices ahead. That said, markets don’t move in straight lines, and based on a shorter-term cycle, there is reason to believe we could see a short-term bounce develop. I have no interest in buying Bitcoin itself, but there is a Bitcoin-related stock that’s starting to get my attention and that stock is RIOT.

Above is a daily chart of RIOT, and in the lower pane I have GBTC for comparison. I like using GBTC as a proxy for Bitcoin because it removes some of the noise and lets me focus on relative performance. Right away, one thing stands out. At point B, GBTC is making new lows relative to point A. Bitcoin, at least through this lens is clearly weaker. RIOT, on the other hand, is telling a very different story.

While GBTC pushed to fresh lows, RIOT held well above its prior low and actually formed a much higher low. That’s classic relative strength. It tells me that despite continued weakness in Bitcoin, buyers are stepping into RIOT earlier and with more conviction. When you see a stock refuse to make new lows while its underlying asset is still sliding, that’s worth paying attention to.

Now, seeing relative strength does not mean I’m rushing out to buy this at the open. Nothing could be further from the truth. Relative strength simply puts a stock on my radar. From there, I let price action do the talking. For me to get involved on the long side, I would need to see clear resistance levels taken out or strong intraday relative strength develop over the coming week. I want confirmation that buyers are willing to press their advantage, not just defend support.

If RIOT fails to do that, I’ll happily do nothing. That’s an outcome I’m perfectly comfortable with. I don’t feel the need to force trades, especially when my broader view on Bitcoin remains bearish. At this point, RIOT is simply a watchlist stock, nothing more.

However, if Bitcoin does manage to rally over the short term, RIOT has positioned itself as a potential leader. That’s the type of stock I want to be focused on, one that shows strength before the move, not after it’s already underway. For now, it’s a waiting game. Let’s see what unfolds in the coming days.

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This LUNR Setup Has Worked Before… Here We Are Again

 

Above is a 60-minute chart of LUNR, and in the lower pane I have a 14-bar stochastics indicator. I’ll be the first to admit I’m not a big fan of oscillators in general. Most of the time they create more noise than clarity. That said, when an oscillator is clearly synced with the dominant cycle of a stock, the signals tend to be far more reliable. In this case, LUNR’s stochastics has done a pretty good job of identifying meaningful short-term lows.

If you look back on this chart, there have been four separate occasions where the stochastics pushed below the buy line and then turned back up. Each time, that turn coincided with a significant bottom and led to a solid rally. Those weren’t minor bounces either, they were tradable moves. That’s why I’m paying attention now, because once again the oscillator is sitting down in the buy zone.

What really adds weight to this setup for me is the price action itself. LUNR is currently sitting at the lower end of a clearly defined price channel, which appears to be providing support around the $18.50 level. I like when multiple tools point to the same area. The channel alone gives me a level to work with, but when you combine that with an oscillator that has historically marked good entry points, the odds start to tilt in your favor.

That said, I’m not interested in blindly buying just because we’re at support and the oscillator is oversold. The way I plan to approach this is simple: I want to see $18.50 hold, followed by the stochastics crossing back above the buy-zone level. That turn is my signal that momentum may be shifting back to the upside.

One very important caveat here is relative strength. I do not want to see relative weakness at these levels. If the broader market is moving higher and LUNR can’t participate or worse if it breaks cleanly below $18.50, then all bets are off. In that scenario, I’m not interested in buying. Support failing while the market is strong is a big red flag.

For now, this is a stock on my watchlist, not in my portfolio. If the pieces line up, it could offer another solid opportunity. If they don’t, I’m perfectly fine standing aside.

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A Low Is Due… But I’m Still Not Buying Bitcoin

 

I’ve been bearish on Bitcoin for the past several months, and I think the evidence continues to support that stance. When I look at this market through the lens of relative strength, it’s clear to me that money has been steadily leaving Bitcoin rather than flowing into it. That kind of behavior usually isn’t a recipe for sustained upside. On top of that, my longer-term cycle work still points to lower prices ahead, potentially stretching into the late summer months. From a bigger picture perspective, I remain firmly in the bearish camp.

That said, markets don’t move in straight lines, and the short-term picture is a bit more nuanced. Over the past 15 months, Bitcoin has been respecting a very consistent 2½-month cycle. This cycle has done a remarkably good job of identifying time windows when short-term lows are likely to form. If you look at the daily chart above, you can see how often this rhythm has shown up and how useful it’s been in highlighting potential turning points.

Based on that cycle, another short-term low looks like it could be due sometime this coming week. Now, even though that suggests a bounce may be approaching, it doesn’t change my overall bias. I’m not interested in trying to pick a bottom here. Instead, I’d much rather let Bitcoin bounce and then look for that rally to create another, potentially lower-risk shorting opportunity.

For me, the key question is whether this 2½-month cycle continues to dominate the short-term swings in this market. If it does, we should get a decent tradable bounce soon. Either way, I’ll be watching closely to see how things unfold and whether this familiar rhythm once again shows its hand.

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YCBD Woke Up on Friday

 On Friday there was one cannabis stock that really caught my attention, and that stock was YCBD. It wasn’t just the price action that stood out, but the combination of volume and range that showed up at exactly the right time. Above is a daily chart of YCBD, and the first thing I want to point out is the clear expansion in both range and volume. After contracting for most of the week, the stock finally made its move on Friday, and it did so in a meaningful way.

I always pay close attention to periods of contraction followed by expansion. When a stock tightens up and volatility dries up, it’s often storing energy. In YCBD’s case, that energy was released on Friday. The wide-range candle accompanied by a noticeable increase in volume tells me participation picked up in a big way. That’s not random. That’s buyers stepping in with intent after a week of indecision.

Now shift your focus to the weekly chart on the right, because this is where the bigger picture starts to come together. Notice how the move from point C to point D closely mirrors the move we saw earlier from point A to point B. In both instances, the stock experienced several red candles in a row, pressuring price lower and shaking out weak hands. That was followed by a strong green candle on increased volume at points B and D. Those candles marked the low and signaled the start of the next rally.

Patterns like this don’t guarantee anything, but when I see symmetry like that on a higher timeframe, I take notice. Markets have a way of repeating behaviors, especially in beaten down sectors like cannabis. The fact that YCBD is showing a familiar rhythm on the weekly chart while simultaneously flashing expansion signals on the daily chart makes this setup particularly interesting.

Going forward, there’s one level I’m watching very closely: Friday’s high at 1.32. That level now represents short-term resistance and a potential trigger point. If YCBD can break above 1.32, I think it opens the door for the next leg higher. A breakout through that level would confirm that Friday’s move wasn’t just a one day wonder, but the beginning of a broader rally.

For now, this stock is firmly on my watchlist. I want to see how it behaves around that 1.32 level and whether volume continues to support the move. If it does, YCBD could be setting up for something much bigger.

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The Warning Sign Inside the Gold Rally

 

Yesterday I talked about how silver’s relative weakness could have helped identify the top in gold and silver on Friday, but there was another way to spot the same warning signal if you were watching the gold stocks relative to gold itself. Sometimes the clearest tells don’t come from the headline asset, but from what’s happening just beneath the surface.

Above is a 60-minute chart of GDX, the ETF that tracks gold mining stocks. In the lower pane is a ratio line of GDX versus GLD. Early on, this relationship was about as clean as it gets. As GDX moved higher, the ratio line followed it almost lockstep picture perfect, with no divergences at all. That kind of action confirms a rally. When gold stocks are outperforming or at least keeping pace with gold, it tells me the move is healthy and broad-based.

That all changed at point B. GDX pushed to a new high, but the ratio line did something very different. Instead of confirming the move, it made a much lower high. That’s a classic relative weakness divergence, and it immediately put the rally on notice. The reason for that divergence becomes clear when you look at what gold itself was doing at that moment. GLD was exploding to the upside, yet the gold stocks could only manage a marginally higher high. In other words, the miners were no longer keeping up with the metal.

That disconnect matters. Gold stocks are leveraged plays on gold, so when gold is surging and the miners aren’t responding with equal or greater strength, something is wrong. The ratio line captured that weakness perfectly. You didn’t need to predict anything  you just needed to observe the relationship.

Sure enough, the confirmation came quickly. The first large red candle in GDX was the signal that sellers had taken control. From there, the damage accelerated. GDX sold off sharply, gapped down at the open, and closed near its lows for the day. The divergence didn’t tell you exactly when to exit, but it put you on high alert and kept you from being blindsided.

What’s even more compelling is that this wasn’t isolated to GDX. Other gold stocks like NEM, AU, and AEM showed the same type of relative weakness leading into the selloff. When multiple names flash the same signal, it adds weight to the message.

This is a great example of why I rely so heavily on relative strength and weakness. Price alone can be deceptive. The ratio line helps answer a critical question: is the market truly strong, or is the move starting to crack? In this case, it was clearly the latter.

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