BTCUSD: Bullish Momentum Returns. Eyeing 15K Target.

2018年1月20日

BTCUSD update: Price is making its way higher as anticipated now that it has penetrated the 11600 resistance area. The bigger picture presents a bullish pennant formation which continues to point to an eventual retest of 20K or higher.

You can interpret this environment in many similar ways depending on how you draw the parallel trend lines. Bullish flag, pennant, etc. The idea to take away is this short term price pattern is a broad bullish continuation pattern. Which for me, means this market is more than likely not going any lower than 8K. On top of that if you consider the highly bullish context of the general environment and velocity of expanding technology, it all points to strength.

If you have not taken any longs yet, there is still opportunity, but risk has slightly increased. The 11600 old support/new resistance level has been compromised which indicates bullish momentum is present. The problem is buying in this area is essentially the same as buying in the middle of a range where price action is most random.

In terms of a position trade long, a lower risk alternative is to start a very small position, something like 20% or less of your usual position size. The idea behind this is if price continues higher without any significant retrace, at least you capture some of it while keeping risk under control. If price pulls back, (which is very possible at current levels) you can then add to your position on the formation of a subsequent higher low. The price area to anticipate such a formation is now the 10534 to 9989 support zone which is the .618 area relative to the recent bullish swing.

The scenario I would prefer to see is price retesting the low at 9683 for a double bottom or failed low formation. I DON'T KNOW if this will happen, but if it does I am prepared to buy more.

When I position trade, I am participating on the broader time frame which means using stops will not be effective since price moves can be sharp and dramatic. I prefer to control my risk with careful sizing. IF the market collapses (ANYTHING CAN HAPPEN), I will not be as affected because I only add when the market is in line with my scenario, not against it.

If price works its way up to the 15K area which is in the middle of the 14211 to 15525 resistance zone (.618 of recent bearish swing), I will be looking to LOCK IN some profit from my position trade. You may wonder: Why sell there when it's going to 20K? I am not controlled by greed. I lock in profits when the herd gets excited and buys into an area where there is a better chance the market will pull back again. I make decisions based on estimates and general probabilities, not feelings. Plus there is no guarantee that this market will reach 20K. And if it does, I will still have a small portion of my original position.

One other notable observation about the 15K area is it also overlaps with the upper boundary of the bullish pennant formation. If price cannot break out, then there is a better chance of it retesting the middle or lower regions of the pennant.

In summary, if you find yourself confused in a market like this, the first thing to do is zoom out and to get a clearer perspective. So many people get caught up on the smaller time frames, that they lose perspective of the broader intent of the market which always carries more weight. This market is bullish, even if it pulls back and retests the lows, that would be a buying opportunity in my opinion. Keep in mind my bullish outlook is also based on the context of this environment which is also another factor often overlooked by inexperienced traders. As far as adding to my position, I am choosing to wait for a retest of the 10534 to 9989 area for a reversal formation. Remember effectiveness in trading does not come from charts and indicators. It comes from knowing how to put the information derived from such tools into perspective in light of your own risk tolerance.

Questions and comments welcome.