Oftentimes, while telling tales around the campfire and drinking scotch old enough to drink itself, someone will ask, “Hammer, how do you know what to trade?” I’m here to tell you, it is both a complicated question and a simple one.
It is complicated because every trade is different in its own way, and yet they all have some key characteristics.
Profitable trades have:
Today, by way of an example, I’d like to tell you about a trade that I first bought at $9.39 on November 9, 2023 and sold yesterday.
The name of the company is Marathon Digital Holdings (MARA). They mine bitcoin. I bought 1,000 shares.
If you read my article last week you know that I am bullish on Bitcoin (BTC) due to several new ETFs possibly being approved by the SEC this month, and the fact that the next Bitcoin halving will happen around April 7.
Those facts fulfill your catalyst and deadline.
What you may not know is that bitcoin miners – those that receive/create BTC by solving complex mathematical problems via computers – can and do go up far more than BTC itself.
For example MARA has jumped over 244% in the past six weeks while Bitcoin itself has climbed about 16%. That’s what I call leverage!
Here is the two month MARA chart. You will notice on November 9 there was a high volume day (notice the black volume spike) and a breakout (the share price hit a short term high outside a consolidation pattern). That was the buy signal.
As BTC climbed in price, so did MARA. The company also announced a record production month as well as the fact it was buying smaller mining companies which added a turbo thrust to this money making rocketship.
The sell signal was a bit more complicated.
The first signal was that the chart has gone parabolic. Trees don’t grow to the sky and neither do stocks. Anyone who has bought MARA in the last two months is sitting on a nice profit and looking for a reason to sell. Yesterday, the stock was up 15% for the day (blow-off top) and hitting some long-term resistance.
Furthermore, the usual Bitcoin idiots were on MSNBC, and the chatrooms on Reddit and Yahoo! where full of overenthusiastic hype which is a nice contrary signal. Volume was twice the normal amount. The shorts had been blown out and lastly one should always have that feeling in the back of your mind that “pigs get slaughtered.”
If you ever find yourself adding up how much cash you’ll make if it goes up another 200% and thinking about how you can hide your new boat from your wife – that’s when you fade the rally.
After texting with my good friend and favorite PTT editor, Brit Ryle, he concurred that MARA was overdue for a selloff.
I sold half my position $30.97 locking in my original stake plus an additional 50% gain. I left another $15,000 to ride until April and will look to add to my shares if and when MARA fills the gap at $20.35.
As of right now, I’m sitting on a nice gain and I’m playing with house money. That’s what I call a “Hammer Free Ride.”
Brit, however, being an options trader, bought MARA puts yesterday afternoon at $0.52 and sold them before ten this morning for $1.01. Not too shabby.
If you’d like to trade along with Brit check out his options service here.
As for the next Bitcoin rally, I’m writing up a special report that I will share with you soon.
All the best,
Pro Trader Today