China's Crypto Crackdown

Sep 26, 2021 | Is China banning crypto a bad sign for swing traders?

Weekly Newsletter- Week of 9.26.2021 

China Bans All Crypto 

Bitcoin and the cryptocurrency market have been experiencing a strong resurgence as BTC once again touched over $50,000 for the first time in months. That all changed this week as China finally pulled the plug on all cryptocurrencies. We’ve repeatedly been forced to report on China, as the unpredictable country has routinely sent ripples throughout the stock market. This week was no different as China sent the entire cryptocurrency market reeling. After implementing progressively stricter guidelines surrounding Bitcoin transactions, this week the country decided to formally ban all Bitcoin-related activities. 

Progressive Restrictions 

At first, Chinese regulations took aim at Bitcoin miners. As we’ve discussed in the past, the mining of Bitcoin requires so much energy, that concerns over the environmental impacts of mining the coin have been steadily increasing. This week, all Bitcoin transactions were officially banned illegal as well. The highly regulated state left no wiggle room with their new policy! It is now illegal to buy, sell, or conduct any activities using Bitcoin. The People's Bank of China issued statement vowing to crack down on all cryptocurrencies while also condemning the technology as a whole. 

The Threat of Crypto 

As we previously noted, China has been the leader in the clubhouse when it comes to Bitcoin restrictions. They have been implementing increasingly more restrictive laws on all cryptocurrencies in recent years. The Chinese government stated Bitcoin is a threat to its people, and it believes all crypto assets are simply tools for partaking in illegal activities. China noted money laundering as a major concern with Bitcoin. The new laws are so restrictive, exchanges outside of China are also off-limits to the country's citizens. The updated policies also outlined new procedures to ensure it continues to also crack down on mining as well. 

What’s Next for Crypto? 

The news coming out of China sent all cryptocurrency trading lower. Bitcoin and Ethereum each dropped nearly 10% with the rest of the sector trailing behind. China had been a popular destination for miners given its relatively low energy costs. As recent as 2019, China was responsible for over 75% of the world’s Bitcoin energy consumption.  China isn't the only country whose been vocal about the need to regulate Cryptocurrency. In last week's newsletter, we discussed how the SEC was struggling to implement regulations, as the US government continues to explore its options. The Chairman for the SEC noted the agency was “working overtime to create new regulations for the cryptocurrency market”. 

Weekly Swing Trades

PNRG (Prime Energy)

October 2, 2022

Entry Price:

80.62

Stop Price:

76.85

Target Price:

88.04

Time Frame:

1 Week Hold

Expecting a short-term bump after a recent OPEC+ announcement regarding the a supply constraint to oil. The constraint would result in ~1M less barrels of oil per day, which should cause a price jump. Low RSI and bouncing off our 250 day moving average, both hallmarks of a good swing trade.

DV (Doubleverify)

October 2, 2022

Entry Price:

27.75

Stop Price:

26.75

Target Price:

29.00

Time Frame:

3 Week Hold

Using our moving averages heavily on this swing trade, look for continued strength as we try to notch out a 6-8% gain. Specifically, we are taking advantage of of a recent cross over in the 50 day moving average. Last week closed down, so wait for confirmation of a reversal.

Disney Won’t Commit to Theaters 

While most of Disney’s operations were either dramatically slowed or outright closed during the pandemic, their streaming platform Disney+ has become a major winner for the company and its stock. Despite very few original titles available at launch, Disney+ ended its first year of operations with over 73 million paying subscribers. For context, Netflix has over 200 million paid subscribers, though they have been operating for significantly more years. 

During the pandemic, few industries were hit harder than the movie industry. As stay-at-home orders increased, many movie productions were unable to be safely filmed, let alone seen. Because of this, Disney was one of the main film distributors to experiment with at-home movie releases. Disney has utilized three separate models for its movie releases as of late: 

1. Release movies free on Disney+ to paid subscribers 
2. Release the movie in theaters but also on Disney+ for $29.99 through Disney+ 
3. Release exclusively to theaters 

The Future of Theaters 

It's no secret, movie theaters like AMC and Regal have been very vocal about their desire to only see new movies released in their theaters. It's been well established that at-home streaming has affected theater sales. This week, Disney was not committal to the future of their own blockbuster movies. With such an extensive library of intellectual properties, Disney will always be a dominant player in the movie industry. Disney has agreed to release the rest of their 2021 movie slate exclusively in theaters. Unfortunately for stocks like AMC, Disney would not commit to theatrical releases moving in 2022. As home entertainment systems and ultra high-definition TVs continue to improve, the at-home viewing experience continues to improve. Should Disney pivot their model to focus on the at home experience, this would be yet another headwind for theater chains that are already struggling.

AMC Theaters to Accept Dogecoins 

Few stocks have been lifted by the retail investor as much as AMC Theaters. As an industry that was hammered by the pandemic while continuing to operate in a dying business, it’s fair to wonder about the future of the movie theater! Over the past 12months, AMC was able to generate huge amounts of capital, thanks to retail investors as the entire ‘meme stock movement’. AMC was once again looking to appeal to their core base this week when the CEO announced they’ll be adding Dogecoin tokens as a form of digital payment. Through a Twitter poll administered by the CEO, over 40,000 people voted, with 80% voting ‘yes’ to adding Dogecoin as payment. AMC will start accepting cryptocurrency as payment by the end of the year, and now Dogecoin will be added to that list. Outspoken Billionaire Elon Musk did state that Dogecoin will first need to drop its fees before being truly considered as a viable form of payment. None this less, this is a big win for Doge while also adding more legitimacy to cryptocurrency. 

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Weekly Watchlists

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Weekly Review

Market Performance- Week of 09.25.2022

Recent Winners

SBUX (Starbucks)

SBUX (Starbucks)

Entry Price:

85.00

September 11, 2022

Price at High:

89.90

Return for Members:

5.76%

Timeline:

2 Month Hold

Strong momentum over the last few weeks. Watch for a mean reversion, but if moving averages stay consistent look for an early play to open the week.

PNRG (Prime Energy Resources)

PNRG (Prime Energy Resources)

Entry Price:

83.20

September 4, 2022

Price at High:

100.00

Return for Members:

20.19%

Timeline:

3 Week Hold

PNRG had a drawdown to historical levels of support (around the 100 day moving average). Looking to make an entry in the coming days as we also have macro tailwinds with the energy crisis in Europe.

PYPL (Paypal)

PYPL (Paypal)

Entry Price:

87.00

August 28, 2022

Price at High:

103.00

Return for Members:

18.39%

Timeline:

4 Week Hold

Playing off the dip in June, we're starting to see momentum as the 50MA is crossing over the long-term averages. Look to for momentum to continue and an early entry on Monday.

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