Leaving This Crypto Name After Free Fall

OK, gang. After being out for a week and a half, let's start cleaning up a few items. 

If you read my early column, you already know what I'm thinking when it comes to the short- to medium-term prospects for Bitcoin and other cryptocurrencies. Many readers may recall my long position in DeFi Technologies (DEFT). The performance of that stock is heavily dependent on a decentralized, but healthy, financial environment broadly and upon the price per U.S. dollar of Bitcoin and other crypto more specifically.

I had not written to you on this name since October 31 (Halloween), when I told you that I was adding on weakness. My goal at that time was to get my average point of entry below $1.90. Unfortunately, the stock broke below the support level and went into a mini free fall during November. The firm reported on November 14 and disappointed on both earnings and revenue generation. Through the later part of November, I went into self-defense mode on this name.

What Does That Mean?

It means I added quite a bit to my long position in order to get out when we saw a rebound in the price of Bitcoin. The first part of this strategy worked like a charm. I was able to get my average price down to $1.08 by taking on more risk than I probably should have. Did I trade the stock perfectly? No. DEFT traded as high as $1.70 during the half-day session on Friday. I talked to the colonel about getting flat that position and decided to stick with it. That was a mistake.

The shares closed on Friday at $1.52 and are trading at $1.41 at last glance as I write this piece. I no longer have interest in the name and consider my initiation a mistake. I will be exiting the name later on Monday morning after this piece is public information.

The Chart​

Readers will see my ascending triangle pattern, which did its job as far as providing lower prices is concerned. Relative strength ​showed some life last week. That will likely reverse on Monday morning. The daily MACD showed some signs of improvement as well. I imagine that, too, will reverse as the opening bell rings across trading floors on Wall Street.

Some of you may be true believers in the crypto revolution and see this as another buying opportunity. I see the U.S. enforcement of the Monroe Doctrine in Venezuela and the prospects for peace in Eastern Europe as potentially significant downside catalysts for cryptocurrencies. Those impacts could allow for sharply reduced demand for Bitcoin for illicit purposes. I may be wrong. That said, I have recovered my investment and am no longer interested in the stock.

At the time of publication, Guifoyle was long DEFT equity.