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December 21, 2020

Top Trading Ideas for 2021

Frank Cabibi

Throughout the year, we've seen many changes to the way we trade, how we manage risk and how we interpret the markets. The new insights we have gained over the months usually come after years of trading and adapting to ever-changing environments. We've done all that in a matter of months! Up until the New Year, we will see even more changes to the way we trade as news about stimulus, BREXIT, COVID-19 and other things storm the market and dominate the news. With all this in mind, from what we currently know, here are some things that we think will be top tier for trading/investing in the markets, forex, metals and crypto from here and into the next year.

Because we're looking for ideas that stay relevant in the longer term (as in 2020 and 2021), these ideas/setups are going to be more fundamentally based rather than short-term technical setups.

EUR/AUD

EUR/AUD daily chart

This pair has proven to be very volatile during times of economic fallout. That spike we see starting in late February kept bringing up new highs for a massive gain once the rally was over. With the news about the UK and their emergency from the new COVID strain, we could see heavy volatility from here on as a new strain could be bad news for our most recent vaccines. One thing we can take from a trade like is momentum. If governments start announcing further shut downs worldwide, expect this pair to take flight once more.

Biden's Goals for Solar Power and Cannabis

As of January 2021, the Biden Administration plans to decriminalize marijuana as well as help introduce more solar panels as they push to end the era of fossil fuels. Experts in the clean energy field have established that solar power is now less costly than fossil fuel plants. Companies like SolarEdge (SEDG) and Sunrun (RUN) could see some long term growth in the next 4 years.

Cannabis is also something to look out for during Biden's presidency. With the MORE Act already passing through Congress which aims to decriminalize pot, it's up to the Senate to push it through although it is considered unlikely. Nevertheless, more bills continue to swing into view such as the STATES Act. This bill will help companies in their profits by giving them tax breaks since they pay sky-high amounts as of now. Although these bills are not guaranteed to pass, this shows that the government is pushing toward more leniency on this industry and will likely reach some sort of conclusion with the help of Biden's push for legalization.

Gold

XAU/USD 4H chart

Gold will also have a big role to play in the coming months as well as into 2021. As you probably know, gold is a risk-off investment and usually performs well when the USD suffers. This year, stimulus brought about some extreme printing of money pouring into the US economy. This in turn, hurt the USD causing the XAU/USD pair to skyrocket in the summer.

With the new COVID strain out in the UK, there are some things we need to consider: what does this mean for our vaccine? And will countries have to shut down once more? If this strain of the virus becomes another global situation, it is likely that our country will have to repeat the same process back in February and March. A country-wide shut down will only hurt recovering businesses more, and stimulus will be needed to be pumped back into the economy. If the future were to play out like this, the USD will only be further weakened as gold will rise in demand. Analysts also believe in a $2000 price target for this metal.

Crypto

Similarly to gold, cryptos will likely see a rise in demand if the USD falls. More analysts, hedge funds and banks are starting to recognize this type of currency transaction as the way of the future after being so bearish on them for the past three years.

Bitcoin had a key thing happen with Grayscale Bitcoin Trust increased their asset in Bitcoin to over $13 billion from $1 billion last year. We are also starting to see more funds get into this crypto like Massachusetts Mutual Life Insurance Co. who bought about $100 million to add to their portfolio.

Another crypto to look out for going into 2021 is the meme currency, dogecoin. After Musk's latest tweet about doge, the pair soared 20% reaching highs from July. Elon Musk is clearly joking when he talks about dogecoin, yet his words still bring traction to the market. In an effort for investors to raise it over $1, investors don't need valuation to justify a ridiculous price; they just need the hype.

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One thing we could take away from this year is that with hype comes momentum, and it's usually a good bit of it. We saw the way EUR/AUD took off at the beginning of the government shut downs. We saw global stocks rise to all-time highs after the Fed announced their stimulus package. Gold hit record highs as well, all from momentum. The circumstances change, but the idea is always the same. If we can look passed the fact some things may seem worthless (like Bitcoin in 2017, like Tesla in 2019), we can be in for some very profitable trades in the New Year. It all comes down to momentum.


Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

Featured Pic: https://www.gosolarcoach.com/wp-content/uploads/2018/07/Weed_PV-1080x628.jpg

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