Morning Comment: Bitcoin drop (not a problem).....Potential FB breakout

We had relatively quiet day in the stock market yesterday, as the big three averages finished the day pretty much unchanged. We did, however, see a large move in the bond market. The yield on the U.S. 10yr Treasury note jumped to 1.62%, and the TLT Treasury ETF (which measures bond prices) fell over 1%. We’d also note that the LQD high grade corporate bond ETF fell 0.76%...which is a big move in that market. (In other words, it sure looks like the big buyer of LQD put spreads last week knew what they were doing.)

This morning, we’ve gotten some good earnings out of the retailers…with WMT and HD both reporting better-than-expected numbers. However, Bitcoin is getting hit hard. It is down more than 5% this morning…and fell below $60,000 at one point. We’re not hearing any good reason for the decline, so it looks like it’s merely some profit taking after its strong run over the past six weeks.

If Bitcoin drops much below its late-October lows of $59,000, it would give it a “lower-low” and would thus leave it vulnerable to a further decline. However, it would take a drop below the $50,000 by the end of the month to take it below its trend-line from the July lows. Therefore, a further short-term decline would not do any technical damage.

We all know that the cryptocurrencies are quite volatile, so we would not get overly concerned unless Bitcoin fell below that $50,000 level. (First chart below.)…..However, we would note that gold continues to rise, so we still think the yellow metal has more upside movement left in it; no matter what happens to the cryptos near-term.

Shifting gears a bit, we want to focus on Meta/Facebook (FB) this morning. We have been concerned about the increase in regulation that is likely coming for this company. However, we think this will be an issue for next year. Right now, members of Congress are focused on many other things. Besides, if they want to get a lot of credit for “being tough” on FB for not protecting the youth of America, they’ll make it a big issue next year (during the midterm election campaign). Therefore, the headwinds facing FB have been pushed to the sidelines for now.

The reason we highlight this issue is because FB is now testing a very important resistance level. Therefore, if it can rally further from here, it’s going to leave it with some VERY nice upside potential going into the end of the year. As we all remember, FB did nothing between August of 2020 and March of this year. However, it was able to rally nicely over the next six months (rising almost 50%). The recent news about the whistle blower helped the stock fall 18% in September and October, so that had taken a lot of wind out of the sails of the stock.

That said, the rally this month has given the stock some very nice upside potential. It has formed an “inverse head & shoulders” pattern…and it is testing the “neck-line” of that pattern right now. It actually moved above that “neck-line” midday yesterday, but it pulled back by the close. That pullback is not a problem as long as the stock resumes is advance at some point in the next few days. If (repeat, IF) it can push up past (and close above) the $355 level, it will indeed break that “neck-line,” and confirm the breakout. This, in turn, should leave FB a lot of upside potential between now and the end of the year.

This is a long winded way of saying that although we’re worried about FB on a longer-term basis, our short-term opinion will become VERY bullish if it can break (and close) above the $355 level any time soon. (Second chart below.)

Matthew J. Maley

Chief Market Strategist

Miller Tabak + Co., LLC

Founder, The Maley Report

275 Grove St. Suite 2-400

Newton, MA 02466


Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.

Posted to The Maley Report on Nov 16, 2021 — 8:11 AM
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