Should Get Direction Soon in Bitcoin - Higher Probability Down

I believe we are approaching a major move in Bitcoin. Either a burst higher or the next leg lower.

I might get flamed for saying this, but I think there is a very good chance this move starts in the next 12 hours and we head lower.

I realize we are consolidating. I realize bitcoin is low. I realize shorts at near all time highs. However, I see some things I don’t like

Here are the bearish signs

Disbritution - We’ve traded in a range now for 2 weeks. But notice that most of our trading has been in the upper part of the range with significant selling when we approach $6500. This type of pattern is typical with distribution. This is not a guarantee but this is opposite of April's accumulation where most of the volume occurred at the bottom of the range.

But Shorts are High - The ratio of shorts to longs isn't that bad and its really not uncommon for shorts to be high during a bearish cycle. Smart money may be setting themselves up to profit from a move down.

Do You Really Know the Net Position of Shorts? - Even though Bitfinex shorts are high, you really don't know the net position. You can carry high shorts on one exchange but leverage it long on another to manage your position. No guarantee that shorts would feel that much pain. And since most of the shorts are at the higher end, they would need to be at $6700 before you'd expect more high volume covering. In the end, if there are more sellers in cash markets, price can go down.

Short Squeeze? - Too many people are expecting a short squeeze like we had in April. All over crypto twitter, thats all you read. I can’t remember ever seeing two short squeezes that close together. I think it's more likely that big money is baiting people to go long here. I wouldn't go long just because of short positions.

Just basic TA - You have a big move down, then pause. Bearish weekly, bearish trend, the % chance the trend continues is higher than being a reversal

$7300 the perfect short - I've seen this many times. I agree it would be. But I'll say this. I've been patient waiting for perfect trades and bitcoin never seem to give it to me.

Can I Be Wrong?

YES. I still give a 30% chance to be bullish. I would want to see a 4 hour close over $6500 I would cover my short in that situation. Then watch to see what happens. If we were able to stay over $6500 and consolidate then I'd start looking for longs.

One more not. We could get some whale games. I would not be surprised to see a huge high volume move over $6500 that gets aggressively sold down. In that situation if I'm stopped out, I would look to re-enter. But thats a price action play and need to be watching charts to catch that. We've seen that a lot in bitcoin, so you have to be ready for it.

Generally, low risk with stops right here is good risk - reward. The only loss is opportunity cost if we got a big powerful move up. Trade at your own risk and realize that if we do go up and sustain, it probably goes higher very quickly so use stops.

註釋

I follow bulltrapped and he makes a good point. It's entirely plausible that someone is net short on Bitfinex and net long on bitmex to collect funding as bitmex has been paying longs for the last few weeks.

His bigger point is that you can take any narrative and find a bullish or bearish case.

In other words, there are many reasons why shorts are high and it can very easily be a bullish or bearish sign. I just think way too many people are in the camp that "shorts are high it HAS to go higher" which I find to be dangerous.

I'm not short because shorts are high. I'm short because I believe its distribution and we'll have a resumption of trend.

註釋

Unfortunately, I wasn't around last night. Bitmex went down and bulls were able to instantly drive price over resistance. We had already got over $6500 and the close was very close to $6500 so it was dangerous being in bitmex last night. I never hold when bitmex goes down. This happens all the time and there is no way for stops to get triggered. You have to close when that happens 100% of the time.

So at this point, I expect us to trade between $6500-$6800 for a bit. I'm not bullish, but will buy the retest long for a scalp and look to short $6800. If that breaks I'll look to short $7300.

註釋

As we can see, this is a very similar pattern as the bear flag at $7600. The only difference is that bitmex went down so we had a huge jump in price that has had zero follow through. Now we have a failed rally. A close below that orange line is bad news.

My gut tells me that big players took advantage of bitmex maintence to produce liquidity in order to liquidate positions and generate liquidity in the $6800 area to reshort. If we get a big move down today that is exactly what this was.

I only had a small short as I generally wanted to see the reaction, but I will work on building it as we go down. We'll find out if there are any real buyers left now.

註釋

I'm still holding short and will wait to see how it plays out today. Some selling at $6550 but if the fib bots don't protect then I will lower risk and reduce my position. I have an emergency stop at $6680 though its at risk for a spike up, but after 2 days of upside, if we recover $6600 then the chances of going higher become much better, so I'm not going to hold. An hourly close over $6600 and I will go back flat and see how it plays out and see if bots sell the .618 at $6650 area.

Regardless of what I think about short positions or distribution, if we had a daily cycle low at day 51 on August 13th, then 15-20 days up upside would be normal and I'll look to re-enter at higher prices. I don't want to carry a short from $6600 to $7200 or higher.

註釋

Bitcoin tends to respect the 21 EMA when it downtrends. So if we closed over it, I would definitely get out of my short as it would tell you that bots are not aggressively shorting it. The high of the day tested and rejected. So something else to watch.

註釋

We got an hourly close above $6600 so I'm going to take off some of my trade and see how the 4 hour and daily close. Generally it looks bullish unless we see a high volume rejection. To come up $400 after the rejection a few days ago, is short term bullish so I'm not going to stubbornly stay in my short if it wants to go the top of the channel. Especially with weekend coming. If sellers are looking to drive down the top of the range, I would expect it to happen in the next few hours. If we don't see selling, I will go flat.

註釋

I've mentioned this before, but price action reminds me of the choppy bear flag at $7600. While its not an exact fractal it shares similarities. Big spikes up and down look like distribution. Declining volume. Both occurring early in daily cycles.

So I still have a bearish bias so if this market is really going to turn, I would want to see a big green high volume breakout candle take us above $6800 and make that the floor. Then if we started trending and made a right translated cycle high over $8500, I'd look to buy the next cycle low. Until then, I short rallies.

註釋

Interesting that we are forming that same slanted inverse head and shoulders. This morning It broke out above the 4 hour range but had a high volume rejection. Volume has been low this entire time and really low in the last 24 hours of consolidation, so when there is a chance for a breakout and bulls it made, where are the buyers?

註釋

The drop recovered. It was just stop runs. So at this point, I get out of the market and wait. I believe the next move above the range will start a trend, so I'll wait to see happens.

註釋

above or below the range made yesterday

註釋

While I'm bearish overall in the medicum term, the break out is bullish and there is no reason to short. Will need to see signs of weakness. If we hold $6800 then I think we'll fill the gap at $7300-$7400 area. Again, thats why I get out of the market when price action didn't confirm.

$6800 was the last major resistance within $6500 area so with that gone, it doesn't make sense to short until we see weakness.

註釋

Its not a sign of a confidence to grind higher with declining volume. It just seems more of the same. Meaning its just big money pulling orders baiting retail to go bullish. Let them take price up so they can reshort at a higher price and reset sentiment. They reset the short position so no more short squeeze coming. Some alts had a run but most of them just tested the 21 EMA and are heading down. ETH and LTC look terrible. Just like at $8500 we started seeing alts roll over the last 24-48 hours.

I was considering a long tradea at $6750 a few days ago. I 'm not surprised we have a downturn as that we were way overextended. But I really wanted to see more of a low volume bull flag declining channel. This rounded top with high volume dumps is not ideal price action.

I still think $7300-$7400 is possible. If we are going to hit $7400 then we need to see some strong high volume buying occur between $6700-$6850. The pattern just doesn't look good enough for me to long it, so I'll stay short if we go higher I'll look to add up there.

註釋

I've been bearish now for the last 3 weeks. It got lonely as I never really traded this move up, which was an opportunity. And I took some shots at shorting resistance and was stopped several times. But I continued to remain bearish and had a short position. I had bigger orders above $7400 as I thought the .618 would get tested.

In any case, its rough to a gigantic red candle that takes out 1 weeks worth of gains. That's a sign that there are no real buyers here. I don't care how bullish it felt. If there were real buyers bidding it up, they would have found value much higher and wouldn't have let it fall this far this fast. If we lose $6750, it gets nasty and with momentum we could see a lot lower prices.

Its only day 22 of the 55-60 day cycle so we have about 30-35 days of downside if this was a cycle high. its fair to say that Ill not buy any dips. I will remain short. I will look to add as we break supports. If we get back over $7200 then I'll consider closing some and the rest I'll put at break even. We'd need to recover this and make a high in another 7-12 days for me to consider bullish outcomes.