It looks like bitcoin is beginning a bullish move higher … Chinese lockdowns impact oil and global supply chains … more portions of the yield curve invert

Bitcoin appears to be breaking out.

In last Wednesday’s Digest, we highlighted work from our crypto experts, Luke Lango and Charlie Shrem, explaining how bitcoin’s price had been forming a rare, double-pennant shape.

This double-pennant meant that bitcoin was likely about to make a big move but it was unclear in which direction.

From Luke and Charlie in that Digest:

If you look at the bitcoin chart on a multi-month window, Bitcoin clearly entered this pennant in a pretty nasty downtrend.

Bitcoin prices dropped from ~$70,000 to below $40,000 and then entered this pennant. On that time horizon, then, it looks like this is a bearish pennant – meaning that once the pennant converges, you could see a breakdown in bitcoin prices to $30,000.

Source: TradingView

On the other hand, if you zoom out the time frame, it looks like a bullish pennant is forming.

Going back to 2020, Bitcoin is on a multi-year uptrend.

That would imply this is a bullish pennant, meaning that once the pennant converges, bitcoin could soar back to $70,000.

Source: TradingView

Well, since last Wednesday, bitcoin has popped 13% higher.

This bullish move hasn’t been confined to bitcoin.

Ethereum has climbed 14%. Solana is up 25%. And Cardano has added 26%.

Let’s jump to Luke and Charlie’s weekend update of Crypto Investor Network for more on this:

It does indeed look like Bitcoin is breaking out of this pennant in a very bullish way – and that a push toward $50,000-plus levels could be in store.

We told you that, if this happened, we would play the breakout by buying a few of the altcoins that have been on our shopping list for a while.

True to that, we bought a few altcoins (last Friday) and added them to our Model Portfolio.

Fundamentally, this breakout does look like it has legs.

***If you want to take part in this move, make sure you’re viewing it as an “investment” rather than a “trade”

The difference between these categorizations is your expected hold period as well as the strength of your conviction.

If you wade into crypto today in hopes of timing bullish momentum, you might nail it perfectly and enjoy nothing but gains. But any number of global macroeconomic issues could send bitcoin lower. This is because Wall Street has been treating bitcoin as a risk asset in recent months.

Given this, adopting a long-term perspective is important, even though it appears that short-term gains are developing.

Back to Luke and Charlie:

Overall, we are cautiously optimistic that the crypto market may take a meaningful leg higher over the next few weeks and months.

However, we want to advise caution here. The macroeconomic and geopolitical environments remain highly unstable, and therefore, the crypto markets are still subject to immense volatility.

While we believe a breakout could be in the cards, we could be proven wrong, if Putin does something crazy in Ukraine, or if Covid-19 lockdowns become more widespread in China.

In the event we are wrong, Bitcoin could take a big leg lower, and our cryptos could struggle.

Bottom line, Luke and Charlie are bullish at today’s prices with this technical set-up. But they do recommend keeping some of your crypto cash allocation on the side in case bitcoin retests recent lows.

However, even if prices do pull back, here’s their takeaway:

If (a drop in bitcoin and the crypto sector) materializes, we won’t be deterred, because we believe our cryptos represent fabulous multi-year investments that will roar higher between now and 2025, regardless of the macro backdrop.

Before we move on from bitcoin, a quick note:

InvestorPlace now provides a fantastic, free newsletter that’s dedicated to keeping you up to date on the latest in the crypto, NFT, metaverse world.

Top analyst Ashley Cassell writes The New Digital World, bringing all the latest sector news to your inbox, totally free.

As you know, this is an explosive, fast-developing corner of the market, where being in-the-know even a day or two ahead of the masses can mean a huge difference in your returns. Click here to make sure you’re at the forefront of all the breaking news.

***Meanwhile, lockdowns in China are creating more uncertainty for global supply chains and oil

Shanghai – China’s biggest city with 26 million people – is shutting down.

From CNBC:

The city-wide lockdown measures include orders to work from home as well as the suspension of public transit and ride hailing, Shanghai city announced Sunday night. Previously, only specific neighborhoods had faced temporary lockdowns to control pockets of outbreaks.

The initial phase will run from Monday to Friday morning and apply to the eastern part of the city where the financial center is, the city said. The second phase will apply to the western part of the city, and run from Friday morning to the afternoon of the following Tuesday, April 5, municipal authorities said.

This is just the latest city to be locked down by Chinese authorities due to a rash of COVID breakouts in recent weeks. The related ripple effects are now impacting the global oil market.

China is the world’s largest oil importer. It imports roughly 10.3 million barrels per day of the 15 million barrels per day it consumes.

So, any material decrease in business activity that impacts oil consumption is going to influence global prices. And, in fact, yesterday, oil fell 7%. As I write Tuesday, it’s down another 3%.

We remain highly bullish on the oil trade. But this supports why we’ve been urging readers to be ready for volatility if they hop into oil today.

***At the same time, Chinese lockdowns are putting even more pressure on global supply chains

In last week’s issue of Market 360, legendary investor, Louis Navellier, pointed out how the war in Ukraine is forcing businesses to find new supply routes.

This is resulting in shipments being redirected through some of the world’s biggest ports in China and Hong Kong – the same one now impacted by lockdowns.

From Louis:

Chinese officials have introduced strict controls and begun mass testing workers and drivers at ports like Shenzhen, Shanghai and Ningbo, as well as at factories throughout China.

The timing is set to impact the busy season for produce shippers from April through July.

Put everything together and Louis warns that the global supply chain crisis is about to get worse. But he sees an investment bright spot:

Elite shipping stocks.

From Louis:

The situation is giving profit potential to fundamentally superior stocks in the shipping sector with strong sales and earnings, as well as the ability to raise rates in a highly inflationary environment.

Louis points toward Matson Inc (MATX) as an example:

Thanks primarily to a 139% surge in volume to China, Matson achieved blowout results in 2020.

Last month, MATX smashed analysts’ expectations for its fourth quarter and full-year 2021. The shipping company achieved fourth-quarter earnings of $394.5 million, or $9.39 per share, and revenue of $1.27 billion, which represented 361% year-over-year earnings growth and 81% year-over-year revenue growth. The consensus estimate called for earnings of $4.77 per share on $1.08 billion in revenue, so Matson beat earnings estimates by a whopping 97% and revenue forecasts by 17.6%.

For its fiscal year 2021, Matson reported earnings of $927.4 million, or $21.47 per share, and revenue of $3.93 billion. That’s up from earnings of $193.1 million, or $4.44 per share, and revenue of $2.38 billion in fiscal year 2020. These results also topped estimates for earnings of $17.00 per share on $3.74 billion in revenue.

The stock also earns high marks from my Portfolio Grader.

By the way, Louis’ Portfolio Grader is a free tool you can access right here.

Curious if you’ve found a solid shipping stock? Use the Portfolio Grader to get an immediate snapshot of its strength or lack thereof.

And to learn more about joining Louis in Growth Investor to access his other fundamentally superior picks, click here.

***Finally, there’s been another yield-curve inversion

(For any newer Digest readers less familiar with yield curve and inversions, click here.)

Last week, we highlighted how the yields on the two-year Treasury and five-year Treasury had inverted.

Well, yesterday, we saw another portion of the yield curve invert.

Both the five-year note and the three-year saw their yields climb above that of the 10-year Treasury. Also, we saw the five-year and the 30-year yield invert. This is the first time that has happened since 2006.

Meanwhile, the “10-2 spread” that we’ve been monitoring here in the Digest continues to careen toward “0.”

As I write Tuesday afternoon, just before our publishing deadline, the difference between the yields has fallen to just 0.01.

By the time you read this, it might have inverted.

A negative reading has preceded the last eight recessions. If we go further back in time, the inversion has preceded 10 out of the last 13 recessions.

But as we pointed out last Friday, an inverted 10/2 yield curve doesn’t mean an immediate recession and implosion in the stock market.

In fact, if we take the 10/2 inversions from 1998, 2005, and 2019, there was an average of 21 months between the inversion and a recession. Meanwhile, over those months, the S&P averaged a 14.7% gain.

So, what we’re seeing is a bad omen for the economy, but it’s a slow-moving bad omen.

We’ll keep you up to speed on all of these stories and more here in the Digest.

Have a good evening,

Jeff Remsburg