Clearly, at $6500, momentum and have been weak, which suggests we could see an eventual and stronger breakdown here before we see a stronger momentum reversal. Compare for example to Mar 29 9:55 PM (UTC) where we saw a very strong momentum reversal at the dip with 5 min Convergence. Here at about $6450 we've also seen 5 min Convergence but very weak momentum with price barely touching $6550 off a low of $6457, for only a 1.44% bounce. It's fair to say the market is waiting this time around for more confirmation after the previous strong dip to confirm a bottom. In general, the stronger the dip, the stronger the reversal, and so far, we've seen a fairly gradual move from yesterday's high of around $7200 to $6500, just less than a 10% change.
It's notable that the peak at $7200 was also indicated by 5 min Divergence and saw three touches off the same resistance before reversing to the lower line of the pennant/triangle pattern. Here, a good short opportunity could have been taken with a target of the next level signaling 5 min Convergence given the knowledge of a likely pattern breakdown and repeated failure to break resistance with Divergence signaled. Taking 50% profit at ~6700 would have generated nearly 7% profits. Then a secondary target (if you were willing to hold this position through the middle of the night, i.e. super RISKY) could have been in the $6400-$6500 range. Since 5 min Divergence was signaled just below $6500 we could have taken another 25% (or even 50%) profit here, which would be a 9.7% move from $7200. Given the likelihood of a strong bounce coming soon it seems wise to close out the position here. Order book sell pressure seems to confirm that the risk:reward at this stage becomes fairly low for a continued short given the signaling for 1 D Convergence.
An additional pattern that is appearing is a that would require a breakout above about $7200 which was previously strong resistance. This combined with 1 D Convergence momentum could result in a big move from the $5800 to $6500 range depending on candle closes in the next day or two.
Below $6400 we could see a stronger move to $6200 or the lower channel trendline. Two major trendlines intersect below including the huge channel we've been mostly moving within since Feb. 17 when we saw the last peak. These trendlines confirm major support between $6000 and $6200.
A 1 D close here above $6900 would invalidate RSI Convergence so clearly TOO much momentum too early could mean momentum fails to consolidate for the signal confirmation.
This seemed to be the case last time with the huge breakout on 4 hr RSI Convergence as we got a pretty big move on the 4 hr, followed by a large dip that shook out a lot right before we saw a few bars of lower momentum before finally the big breakout.
Given that we're so close to the bottom some pre-positioning, maybe 50%, might be warranted.
I don't think we've confirmed a bottom quite yet as we need 3.5 more hours to confirm this big green candle so anything can happen, likely a period of consolidation.
Still, $400, or about 6.2% in less than 40 min is pretty amazing. Feel kind of dumb now though momentum wasn't where I expected it to be.
I feel like this overall risk aversion leads to poor results though in this case I should have just hit market buy when I saw the break.
With that being said, an entry at this level seems like poor risk reward if we presume upside of about $7250 and downside from $6824 of about $6000 or about 6% down to 12% up.
Given this current rally the order books are pretty empty so there's definitely some expectation now that we could see $6k should this current rally fail to break $7k.
Given expectations of a rebound here based on indicators it seemed reasonable to look for an entry prior to a breakout confirmation. In my experience the waiting for confirmation method is poor because you end up with a much higher price and take on much higher risk if the breakout momentum ends up weak or the market has been manipulated. Better to shoot for entry on the way down with some understanding of where the market will bounce and what indicators have already signaled a potential reversal and what entry level will work based on order books and chart support levels.
It seems like as usual with expectations of support at $6500, the market overreacted but not quite enough to hit $6400, which wasn't as strong a support level.
It makes sense to target the main support price +/- 0.75% so that would have been $6451, $6500, and 6548. This would have been 100% hit.
Or another possibility is targeting more granular price levels, so 6451 6475 6500 6524 6548 with a distribution weighted towards the lower end, so maybe 80% of total position size at $6500 or less and the rest at the two higher targets.
Or maybe instead of more concentrated position increase the distribution if you're less certain about your target entry.
So maybe $6402, $6451, $6500, and $6548
In this case $6402 would have been missed so it would be $6493 avg. price (if my math is correct) with a .533 distribution of the total target position allocated to $6451 and $6500 and 0.2 of total target position allocated to $6548. If we assume 6 BTC total position that would be 1.6, 1.6, and 1.2 since the last 1.6 would be missed.
If I used the more granular targeted price the avg. would be $6487 with the full position size.
The more granular target will definitely increase risk if your price target is wrong, but it does result in a slightly lower average price.
Given better than 50% odds of predicting the correct target (say 60%), then using the granular target would result in higher net gains depending on the risk:reward expectations.
With target exit of $7k and downside risk of $6.2k, at ~$6.5k, the reward:risk ratio is $500 : $300, so 1.67 so not great but not terrible either.
If we presume 60% win and 40% lose probability then that results in expected gain of $180/BTC. With 50/50 probability then the expected gain is $100/BTC.
1 D RSI/MACD convergence faintly hinted, but probably not strong enough a signal to trigger a bigger rally.
Only 55 days have passed between the previous low and the current low and the price change has been fairly minimal. My expectation was a slightly bigger dip, which would have triggered more volume and momentum in the market.
The momentum we saw today has been extremely weak, especially by historical standards for a bottom. We could see a slow reversal given the persistent low liquidity and the fairly low risk:reward for shorting between $6.5k and $7k.
2-3 hr RSI/MACD convergence has signaled for quite a few days, but it seems like the expectation of a bigger move hasn't materialized. For the most part this just means we're going sideways, which is clear from looking at the 1 D chart.
I would be watching out for big RSI divergence signals on the 30 min to 1 hr charts as this could signal the start of a stronger reversal.
Clearly, $7k is proving difficult to break so overall the market might need some external trigger to bump things higher (or lower).
As I'm typing this we're seeing a breakdown to $6900, but below this we have a trendline with decent support at about $6850 then $6700, then the top of the pink channel, which we broke out of at around $6500-$6570 on the 5 min charts.
So we could be stuck going sideways for a while.
Overall, we've moved mostly sideways with significant volatility, which is great for trading if you catch the right moves. Each day there's been at least one killer move and then a few others that were higher risk. As volume, momentum, and liquidity drop you start to see fewer high reward, low risk opportunities that allow getting in and out quickly.
On the other hand, Google Search Trends showed an uptick for "Bitcoin." With that being said, the markets are extremely jittery overall, and there's nothing bullish about Bitcoin or crypto right now.