Bitcoin: Adjusting To Out Of Play But Bullish Location.

2019年12月15日

Bitcoin is stuck, but before you get too bearish, it is worth noting WHERE it is stuck. The 7K level is a minor support, but it is within a very broad support zone of 7275 and 5464. In the middle of the zone is the 6558 reversal zone boundary. These levels and areas are not made up, or randomly selected. They are a result of previous price action and are proportional to relatively broad movements in Bitcoin. The purpose of this article is to point out how we are interpreting recent price action, and adjusting in terms of strategy.

1. 7275 to 5464 is relative to the .618 of the 3150 to 14K impulse structure. This is a typical retrace are for corrective waves to complete (particularly Wave 2). The movement from 14K to 6800 is a corrective consolidation that we interpret as a Wave 2.

2. Lower highs continue to be established, but lower lows are not. The 6750 (recent swing low) is NOT that much different from 7250 (previous swing low). A bearish trend is defined by a series of lower highs AND lower lows. Until a major new low is established, the risk of short squeeze is HIGH.

3. In order for bearish momentum to take hold, and FOLLOW THROUGH, a decisive close above 7875 would provide confirmation. UNTIL this occurs, buy signals carry less weight.

4. In range bound, lack of follow though environments, particularly at attractive accumulation levels (like 7275 to 5464), position trades are much more efficient compared to swing trades. As long as the sizing is carefully managed, it is less likely to get shaken out or stopped out as a result of random price noise. Also if a short squeeze develops out of no where, there is no missing out on the move.

5. Bearish momentum usually unfolds QUICKLY and makes progress. Bitcoin is struggling to go lower just as much as it is to go higher. This is NOT characteristic of a bearish trend. (Want to see a recent bearish trend? See stock ticker CGC).

6. Price can test 6550 or even the 5500 level and STILL establish a broad HIGHER LOW formation. 3150 is the reference point. As long as Bitcoin maintains some stability in this range, it is offering wholesale prices. Keep in mind, this perspective is NOT for small time frame strategies that utilize time frames less than 8 hours.

We recently entered a swing trade at 7550 and got stopped out at 7025. After taking a few stops in a row, it is easy to lose confidence in a strategy, but that is the common mistake that leads to strategy jumping and inconsistency over the long term. How come we don't change our swing trade strategy? Well, because it has proven itself across multiple markets like stocks and forex. When a market is out of play, no strategy will work, and that is precisely why we trade price MOMENTUM, no matter what market.

Just like markets, strategies also go in and out of favor. While there is not enough momentum for swing trades at the moment, position trading or inventory management is still attractive (high probability location + strategic sizing) because it does not require such precise timing, momentum or attention. Is it possible for Bitcoin to go back to 3K? Sure and that is the risk you MUST accept and adjust for when managing inventory. How do you think the institutional players do it? By obsessing over 1 hour charts?