Lower highs often lead to lower lows. As BTC and LTC showed some considerable structures in their respective movements, this market has not. The 1004 to 1114 (.618 of recent structure) has never been compromised, and the that was established during the fourth week of Jan is also still intact. On top of that, a new minor lower high at 955 lead to the break while price is now testing the 824 level which is the .382 support of the recent swing.
These observations are all signs of short term weakness and this momentum can persist until a reversal structure unfolds. At the moment, price is within the 872 to 739 (.618 area of recent structure) which is a convenient area for such a reversal, but until it appears, I would hold off on any new long positions.
A break of the 824 level, and this market is more likely to retest the 739 boundary. Again the key to using these levels is what to reasonably anticipate. The type of momentum that is taking this market lower needs to be counter acted with structure like a mini or higher low. A simple candle reversal will not be enough because there are too many signals in play.
Do not be confused by the different magnitudes. It is possible to have short term momentum within a longer term structure. If you are looking to build a long position in this market, the objective is to wait until price action realigns with the bigger picture, and at the moment it is in a convenient location to do that.
My concern with the bigger picture is the 973 lower high which can lead to a larger magnitude lower low. I am not saying it will happen, but because of this structure, there is an increased chance that the 670 level or lower can be retested.
In summary, interpreting the price action is not the same as reacting to it. I am using these observations to better determine how to position myself for a position trade long, especially since I do not short these markets. Compared to the other major coins, this market is acting weaker and for that reason, I will require much more validation before taking a position. The predetermined levels and areas offer price locations to anticipate reversals, but there is no guarantee that they will appear. By having a flexible mind set, I can acknowledge the immediate market intent while waiting for it to unfold in the way that conforms to my position trade entry criteria. If it never meets my criteria, I simply sit it out. I always talk about buying weakness, which you can do aggressively or conservatively and I make this decision based on market conditions. If price is aggressively selling into a reversal zone, I will be more aggressive and buy right into it with a small position and wait for stability before building the rest of the position. If price is selling in an orderly fashion like it is at the moment, I would rather be much more conservative and wait for the momentum to show clear signs of change. There is no "right" way to do this, it all depends on your general outlook, your plan, your risk tolerance and the time horizon of the position you are looking to put on.
Questions and comments welcome.
What do you think?