Bitcoin: Bear Structure Can Test 42K ?

2021年12月19日

Bitcoin has generated 2 more aggressive buy signals since my previous analysis, but there is no follow through. Should this be interpreted as a sign of weakness? How does the probability of the current location play into this? These conflicted situations can be very confusing, especially for those who operate without a clear set of rules. In this article I will describe the scenario I need to see in order to be confident with SWING trade longs, and what will prompt me to AVOID this market further.

In my previous article I highlighted a buy signal that appeared around the 49,500 area. Since then, price has tested the 45K area low numerous times. That idea has been negated by the market and should be stopped out for no more than a 4K point loss (typical risk at the moment). Respecting stops is what prevents you from being at the mercy of the market (hope mode). Hope is the strategy of choice for most traders and investors because it requires no effort, and no responsibility and it works every once in a while (just like a slot machine!).

While the probability of the current location still favors bullish reversals (triple bottom higher low formation relative to 42K), the current price structure is bearish. The buy signals that have appeared have no momentum which can be interpreted as a sign of weakness. This is one of the risks that you face when taking aggressive longs in the face of an unfavorable price structure.

The more conservative choice in this situation is to WAIT for the structure to change back to bullish. This requires the 50K resistance level to be cleared, followed by some kind of retrace or test of support. This can take a few days to unfold or less, but until that level is cleared, I'm going to have to anticipate resistances being respected, and supports breaking (the typical pattern of a bearish structure).

IF the 45K support is cleared, the 42K area can be tested again which can possibly turn into a double bottom but as long as the bearish structure continues to unfold, buying into bullish reversal patterns still poses the same conflict we have now.

Keep in mind I am specifically making observations within the scope of my swing trade strategy. Prices between 30K and where we are now are still attractive wholesale prices that are within reason when it comes to long term investing. As I repeat often investing or "inventory management" as I like to call it, is more a function of strategic sizing and scheduled timing which relies very little on detailed chart analysis. You just have to have a very good understanding of how to control risk.

Many people are caught in uncomfortable positions as a result of listening or believing others while being emotionally vulnerable to messages of hope and "making millions". Understand that if anyone knows anything in this game (inside information) they are NOT going to share it publicly or for free. Hope is not a strategy, and most "gurus" are marketers. Learn to listen to price, at least it reflects reality.

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