Bitcoin: 17K To 25K Test?

10 sept. 2022

Short squeeze off the 18Ks back to 21K quickly. What does this mean in terms of the bigger picture trend and momentum? Before you listen to the novices calling for 50K, it is important to objectively consider this shift in terms of price structure within the context of the economic environment.

First, before you ask: "Isn't there a way to foresee such moves?". Answer: No. Markets are highly random which means there is no way to forecast them with any degree of accuracy.. While I have been writing about bearish signals and anticipating a test of 17K in most of my recent articles, I have been warning followers of the RISK and what can go wrong when selling into potential support areas, even when the overall structure favored a support break. Accounting for RISK is what prepares you for the possibility of such a short squeeze, whether it unfolds or not.

Instead of asking "why?" you should only be asking "where?" in these situations and adjusting your outlook to the new piece of information. Here is what I consider:

The broader structure (lower highs and lower lows) is still generally bearish over the long term. No major resistance has been taken out yet (25K). If you consider the economic context: trends in bond yields and the Dollar are still poised to continue higher which mounts bearish pressure on everything. This means any rally attempts in the stock market or Bitcoin (there is a correlation) have LITTLE potential or sustainability. That's the broader view.

The short term view (one month out): The large green candle off of the 18K area has taken out a minor resistance at 20,500. This means the recent bearish movement off of the 25K peak is no longer in play. Momentum (NOT to be confused with the broader trend) may be bullish. Such a shift can lead price REASONABLY back into the 23 to 25K AREA RESISTANCE. IF this resistance is cleared, then 28K becomes a possibility. This is the same story for the S&P (correlation). Bear market rallies can happen and it is very important to recognize their limited potential and risks and not get carried away with hype.

IF Bitcoin produces a new sell signal somewhere between 23 and 25K, it would still offer a short swing trade opportunity with a more favorable probability. Again that is "IF". On the other side of that, IF a bullish momentum continuation pattern appears somewhere between 20 and 21K that can offer an aggressive counter trend swing trade to the long side. The short idea is on the side of the broader trend and is still more favorable, while the long idea can help to capitalize on a bear market rally of limited duration.

Was I wrong about the 17K test? The market made an attempt and never got back to 17K. It was a potential scenario that was possible but the market does not agree with. I don't pretend to know more than the market like every one else. I respect it and adjust. Now I look for a test of the 23 to 25K resistance area and see how price behaves IF it gets there.

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