Kraft Heinz comes a cropper. Markets ignore that. Pump and Dump days come back to mainstream crypto markets. China debt problem is lurking.
Portfolio News
Market Rally
Markets continued the rally mood with positive vibes coming out of China trade discussions
President Trump said Friday that crucial trade talks with China are going well, adding that he sees a “very good chance” of a deal. He also said he might extend the deadline for imposing new sanctions.
https://www.wsj.com/articles/global-stocks-on-course-for-weekly-gains-11550826589
European markets are a little less sanguine - up but a little unsteady on its feet.
Roku Inc
A quick update on Friday price action for TV streaming service, Roku.
Trade looks like a hero trade with price rocketing to close at $64.47 - my 52 strike call options look rather handy at that level.
Bought
The Kraft Heinz Company (KHC): US Packaged Foods. Kraft announced earnings which contained some unpleasant surprises on sales, brand value writedowns and accounting irregularities investigation.
And they cut the dividend. Share price was smacked instantly down 27% for the day. Markets tend to over-react and I figured that this would be the case here. I bought a small parcel of stock in the after hours market as I do believe there is massive brand value in the business.
I did my due diligence afterwards and might have been better advised to wait until Monday. Share register for KraftHeinz is dominated by two shareholders, Berkshire Hathaway and 3G, who control about 50%. If they decided to sell any part of their holdings down, it will be a bloodbath on Monday. There is no doubt that American consumers are starting to understand the risks of processed foods a bit better and are reducing demand. KraftHeinz has been slow to adapt. Some analysts are of the view they never will. I am going to guess that two big shareholders will begin to shake a big stick. Now the price chart tells the real story - there are big problems here.
The CNBC Options Actions team did review the story. The big takeaway was a spike in implied volatility on the options. I put in a pending order to write a covered call against the stock for Monday open. This could be a long wait to get a recovery. Dividend yield drops to 4.5%
Currency
Chinese Renminbi (USDCNH)
Watched a brief segment on Bloomberg TV talking about the growing China debt mountain. They had been making progress on addressing it but reversed course to weather the impact of the tariffs. My sense is this cannot be good for the currency.
I bought a 12 month to expiry strike 6.7015 call option (2.3% premium to strike). Let's look at the chart which shows the bought call (6.7015), breakeven and 100% profit as blue rays with the expiry date the dotted green line on the right margin.
Price has just to get back to the late 2018 highs to make 100% profit. Now there are a lot of things going against this trade. The progress on trade talks has been a strong driver for rising Chinese stock prices - about 2 percentage points more growth (in US Dollar terms) in China than US since talks started in January 2019. Repatriation of funds used to hold US Treasuries will increase demand for CNH. Improving exports will increase demand for CNH.
Really an instinct trade thinking the debt problem will outweigh all these positive demand factors. Will it play out in 12 months will be a key factor? It might take a lot longer.
Cryptocurency
Bitcoin (BTCUSD): Price range for the weekend was $476 (12% of Friday close). I wrote on Friday that I felt price was poised to have a go at clearing $4000. It certainly did that on Saturday and then gave it all away on Sunday. This looked like a co-ordinated pump and dump across all markets.
The four hour chart tells the story
FOMO [Means: Fear of Missing Out]
Ethereum (ETHUSD): Price range for the weekend was $33 (22% of Friday close). I wrote on Friday that price was poised to have a go at $160 (the last short term high - blue ray now extended). It did exactly that on Saturday and raced further in the pump and then collapsed back to the long term resistance level at $132 in the dump.
I saw the spike news in my Twitter feed. I have one Ethereum trade open which went in-the-money. I moved the profit target a little further away to give the trade space to run AND I put in a stop loss just below those last cycle highs. My trade stopped out at $158.7 for $9.7 per contract profit (6.5%). That pays CFD finance costs for a few days.
I put in a new order on a reversal on the 1 hour chart this morning after the dump. This whole trade move will have shaken out a lot more weak hands - all those FOMO hands. .
CryptoBots
Profit Trailer Bot Three closed trades (1.44% profit) bringing the position on the account to 5.89% profit (was 5.85%) (not accounting for open trades). ZIL trades are after one level of DCA.
Dollar Cost Average (DCA) list remains at 4 coins - all quiet despite the mayhem
Pending list remains at 11 coins with 5 coins improving, 1 coins trading flat and 5 worse. Hard to believe there was a 22% swing in ETH price over the weekend.
PT Defender continues defending 11 coins with successful trades on ZIL and TRX.
New Trading Bot Trading out using Crypto Prophecy. No closed trades.
Currency Trades
Outsourced MAM account Actions to Wealth closed out 4 trades all on AUDNZD for 0.6% profits for the day. Trades open on USDCAD and GBPJPY trading at 0.24% positive equity
Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas
Images: I own the rights to use and edit the Buy Sell image. News headlines come from Google Search. All other images are created using my various trading and charting platforms. They are all my own work. Kraft Heinz logo is in public domain.
Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers
Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices
February 22, 2019