Investors Turn $4M Company Into $8B Crypto Giant Raising A Yellow Flag

To gain an edge, this is what you need to know today.

Yellow Flag

Please click here for an enlarged chart of Eightco Holdings Inc (NASDAQ:OCTO).

Note the following:

• This article is about the big picture, not an individual stock.  The chart of OCTO is being used to illustrate the point.
• The chart shows the huge move up in OCTO stock.
• The move up turned this $4M company into an $8B crypto giant overnight.
  • Eightco sold 185M shares at $1.46.  Investors ran it up as high as $82.98 before the stock pulled back.  OCTO is trading at $48.60 as of this writing in the premarket.
  • The price range shown on the chart indicates tremendous volatility.
  • Investors are excited that the company will buy Worldcoin.
  • Worldcoin itself moved up 46% on excitement.
• Worldcoin is the crypto issued by a project run by Sam Altman, the CEO of OpenAI.  World intends to scan irises of human beings and use the iris scans for human identification. To persuade people to scan their irises, people get Worldcoins.
• In our analysis, for a moment setting aside privacy concerns, there is a potential for a database of iris scans for personal identity.  However, investors are forgetting they are not getting shares in a company that is building the iris database.  Investors are simply owning shares of a company that will own coins created out of thin air.  
• In our analysis, enthusiasm for OCTO shares is an indication of extreme positive market sentiment where investors have thrown all caution to the wind.  For prudent investors, this is another yellow flag. 
• Apple Inc (AAPL) will announce the thinnest iPhone ever at its event today.  Depending upon how investors respond to the event, the event has the potential to move AAPL stock, and in turn, all tech stocks.
• Prudent investors are eagerly awaiting Consumer Price Index (CPI) and Producer Price Index (PPI) data that is ahead.  The momo crowd continues to aggressively buy stocks.
• There are important earnings from Oracle Corp (ORCL) after the close.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Meta Platforms Inc (META), Microsoft Corp (MSFT), NVIDIA Corp (NVDA), and Tesla Inc (TSLA).

In the early trade, money flows are neutral in Amazon.com, Inc. (AMZN) and Alphabet Inc Class C (GOOG).

In the early trade, money flows are negative in Apple (AAPL).

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust Series 1 (QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (USO).

Gold

Gold is at a record high.  

Bitcoin

Bitcoin is range bound.

What To Do Now

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.  A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.