Bitcoin: 42K Break Confirms Wave 5?

2021年2月6日

Our Bitcoin swing trade long from 33,650 has reached its first target at 38,650 and is now attempting to clear the 40K resistance. Based on my current Wave count, this is most likely the bullish Wave 5 of the broader Wave 3 that I have been writing about for some time even though it has yet to confirm. In these situations I often get a lot of questions about buying now, and the answer has everything to do with risk.

Risk? What's That? Only Interested In Rewards.

Swing trades have a time horizon of a few days to a few weeks or months. Characteristics include a clearly defined stop loss, and price targets. These orders SHOULD be determined and placed at the time of the trade. With that comes the question of probability and THAT is what should provide one answer to the buy now question.

From a swing trade perspective, the FIRST question you should be asking is: what is the risk from current levels? And that answer comes from your stop loss order or key support levels. For Bitcoin at the moment, support is near the 33K to 34K area. That means you have to risk 6K points on this time frame which also means you NEED to make at LEAST 6K points of profit to justify this risk.

What is the probability of Bitcoin running to 46K from current prices?

There is no way to generate a precise number as people would like, BUT the price structure and Wave count do favor a test of the 45K area over the next week. While this is the case, there is no guarantee that the 42K resistance or reversal zone boundary just above 42K will be successfully taken out. This is the chance you must take in order to barely justify your risk. For me, all of this translates to: not worth it at these levels. 33,650 is a much MORE attractive level in terms of reward/risk and why we took the signal there and have since reduced our risk at our first target. To make matters more complex, what if price fails or fakes out at 42K, will you have the confidence to stay in? There is a lot of room for second guessing and many traders who buy now are likely to be a weak hand in the face of any minor selling activity.

Taking and managing profitable trades CONSISTENTLY has everything to do with RISK and understanding the loose probabilities that are implied by price structure and price action. When the 38K area was reached after our entry, it pulled back and looked ugly. People who react to such information are likely to exit too early and not give the broader structure a chance to prove itself.

As far as our swing trade, and for those in a similar position from lower prices, there is nothing to do here but let the market work. Price needs to clear 42K to confirm Wave 5 and we have the luxury of letting the market figure it out rather than worry about every little bearish tick that appears. IF 42K fails instead, then it is possible that we are still in a Wave 4 consolidation, even in the face of such a nice bullish move. The consolidation scenario isn't bad, in fact it is likely to provide another swing trade long opportunity once new levels are established.

Thank you for considering my perspective, I hope you find it helpful.