BTC' is the main driver of these markets as it is the heaviest weighted coin in cryptos. Where lulu goes so does the market. Now this does not mean markets do not rotate from blue chips to speculative coins (we saw that this weekend) but overall the market reacts to bitcoin' one way or the other.
So I get an alarm this morning and wake up to a nice little breakout. Now we have been sitting on 30%+ cash since last Thursday so nothing like getting a signal the bulls may be back from vacation early. The chart is pretty simple, we broke the downward trend channel with strength ( above 60) so I went through and started adding some positions back that I had sold in the event we pulled back further. Did I go all in here? NO! I still have a descent Cash position. If you read @marcPmarkets column the other day, forming bad habits now, will eventually result in that feeling of OHH @#$% feeling. So we stick to our plan and our strategy, and are picking up some coins we wanted to add, adding back to ones we shaved off, but of course keeping some cash which limits our liabilities in the event this is a fake break. Patience and money management is key here!
So now that we broke the really short term down trend (magenta line) as well as the first resistance line (in red at 14850) we are pulling back which is normal. I'm looking for a break of $16k to add and then a break of $18500 to add some more. Why not just go all in here. Well first I'm long term, and though I add trades, I do not trade these markets. We could still very well correct and entering a large positions now can lead to large loss later. The key is building a position and adding to an uptrend not "guessing" the direction of the trend in the very short term. Corrections are difficult and should not be traded. My buddy Phil and I discussed over the weekend that the smaller the time frame the more chaotic the price fluctuations. The longer the time frame the trend is much more clear and prices do not fluctuate as much, so below I posted a chart of some trend channels in different time frames so you can see this.
Now I get asked all the time, how do I learn how to trade? The most important aspect of trading and or investing is not the indicators and strategies like EW, Fibb, , or clouds, its IDENTIFYING THE TREND IN A SPECIFIC TIME FRAME. Most cannot draw simple which is the most crucial aspect of investing and or trading.
I broke the chart below into several time frames. The long-term trend channel, the midterm trend channel, the short term trend channels, and the most previous trend channel (on a smaller time frame). Now why are these important? Simple, I want to know which trend is still valid. All but the hyper trend channel are still valid! In the chart above I have the same trend channels drawn and though I could keep breaking these down into smaller and smaller trend frames, we eventually get into chaos. This is why timing markets in the short term are impossible. You look to the longer term trends as a guide.
Clearly we are still in medium an longer term uptrend. This is why we do not sell out of our 70% core portfolio as the longer trend channels are
Bottom line, you want to always be positioned with the prevailing longer term trends, selling some off into extreme highs, and buying it back during extreme dips. This is why we went down to our core holdings last Thursday. Why trade chaos when you can simply invest in the trend?
As a side note, 2 points are a line NOT a trend, need 4-5 points to be valid in my opinion.
Pertaining to the chart it looks like we hit both the trend line and the lower channel we thought we may consolidate in the original chart. We would be guessing as to what happens next, so I am just letting the market settle and find some consolidation. No point in being trigger happy here. There are about 4 different wave counts that I like this is the two I like the most. But only time will tell. Be patient and calm! We have said over and over market corrections are difficult to predict and should not be traded especially if your new to trading.