Trading the BTC breakout
Mis à jour
Despite wild swings, BTC is behaving beautifully from a technical standpoint. On the 15m, BTC is consolidating in a range defined by a double top and double bottom. Within this we find 3 ceiling tests, among other nice bounces.
This ranging presents a tempting opportunity for swing traders intending to catch the impending breakout.
Overview
First we must examine context. BTC remains bearish on the daily, and my bias over the next week or two is bearish. We cannot confirm a bullishness for many thousands of dollars to the upside. However, we may be about to start a leg up.
The impulse from 6k to 11.7 double topped and retraced around 75% to bounce at 7.3. That bounce, in turn, (almost) double topped around 9.1 and retraced precisely to the .786 (fractals man). This is the maximum we could retrace while maintaining bullish potential.
Determining bias
The question becomes: is this accumulation for a bullish breakout? If so, will it be corrective (aka, is selling pressure still dominant and downside still expected) or impulsive? Answering that is important for determining targets of a long position.
Alternatively, this may be a last stand for bulls and bearish pressure wins in the end. In this case, we are left facing dire prospects. No algorithms trading this 7320-9170 swing will be buying below the .786, and we'll have broken a double bottom and the log trendline support (below).
Here I'll examine the past. This period in late February looks similar to what we see now. A steep descent which slows and begins ranging, while RSI increases. No matter the market, this structure often indicates accumulation of long positions.
Zooming in, we see cues indicating the upside break. The entire area forms an inverse head and shoulders. Thinking about why H&S play out by examining the structure within gives even more clues. Bears were rejected not far below the left shoulder low, indicating weakness (solidified by the double bottom). I also note the symmetry of the shoulders: the right shoulder respected the technical level of the left, making a higher low. Watch for cues like these; and keep an eye on momentum indicators.
Entering a position
The classic strategy for trading breaks is to wait for buildup near s/r, and enter with a tight stop. BTC moves extremely rapidly (market makers running stops & cascading liquidations) and usually doesn't have pretty tests and buildups before breaks. In the February consolidation, price rocketed upwards with little resistance. I anticipate another massive movement here, and thus this strategy is unlikely to work.
Another option is to enter somewhat prematurely with a wider stop at a key level, based on your risk capacity.
Finally, one might put a market limit order above the high/below the low to enter the break as soon as it happens. As always, this has significant potential to end poorly. One possibility here is a false breakout to the upside denied around 8270 (previous support and resistance, right above a high volume node). This would clear out many short positions and provide fuel for further downside action.
Targets
A conservative target would be a measured move; 1:1 extension of the range in the box (about $400). This has confluence near key levels in both directions.
For a bullish breakout, targets are very subjective given the overhead resistance.
For a bearish breakout, there is little support until the 7350 low, confirmed by a wide low volume node on the Volume Profile. My first target would be below 7.5k.
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Given larger structure my bias is bullish, but I will be waiting to enter a long. I also may place a short order right below 7.7k given the huge downside potential (breaking trendline, below .786, low liquidity).
This ranging presents a tempting opportunity for swing traders intending to catch the impending breakout.
Overview
First we must examine context. BTC remains bearish on the daily, and my bias over the next week or two is bearish. We cannot confirm a bullishness for many thousands of dollars to the upside. However, we may be about to start a leg up.
The impulse from 6k to 11.7 double topped and retraced around 75% to bounce at 7.3. That bounce, in turn, (almost) double topped around 9.1 and retraced precisely to the .786 (fractals man). This is the maximum we could retrace while maintaining bullish potential.
Determining bias
The question becomes: is this accumulation for a bullish breakout? If so, will it be corrective (aka, is selling pressure still dominant and downside still expected) or impulsive? Answering that is important for determining targets of a long position.
Alternatively, this may be a last stand for bulls and bearish pressure wins in the end. In this case, we are left facing dire prospects. No algorithms trading this 7320-9170 swing will be buying below the .786, and we'll have broken a double bottom and the log trendline support (below).
Here I'll examine the past. This period in late February looks similar to what we see now. A steep descent which slows and begins ranging, while RSI increases. No matter the market, this structure often indicates accumulation of long positions.
Zooming in, we see cues indicating the upside break. The entire area forms an inverse head and shoulders. Thinking about why H&S play out by examining the structure within gives even more clues. Bears were rejected not far below the left shoulder low, indicating weakness (solidified by the double bottom). I also note the symmetry of the shoulders: the right shoulder respected the technical level of the left, making a higher low. Watch for cues like these; and keep an eye on momentum indicators.
Entering a position
The classic strategy for trading breaks is to wait for buildup near s/r, and enter with a tight stop. BTC moves extremely rapidly (market makers running stops & cascading liquidations) and usually doesn't have pretty tests and buildups before breaks. In the February consolidation, price rocketed upwards with little resistance. I anticipate another massive movement here, and thus this strategy is unlikely to work.
Another option is to enter somewhat prematurely with a wider stop at a key level, based on your risk capacity.
Finally, one might put a market limit order above the high/below the low to enter the break as soon as it happens. As always, this has significant potential to end poorly. One possibility here is a false breakout to the upside denied around 8270 (previous support and resistance, right above a high volume node). This would clear out many short positions and provide fuel for further downside action.
Targets
A conservative target would be a measured move; 1:1 extension of the range in the box (about $400). This has confluence near key levels in both directions.
For a bullish breakout, targets are very subjective given the overhead resistance.
For a bearish breakout, there is little support until the 7350 low, confirmed by a wide low volume node on the Volume Profile. My first target would be below 7.5k.
-
Given larger structure my bias is bullish, but I will be waiting to enter a long. I also may place a short order right below 7.7k given the huge downside potential (breaking trendline, below .786, low liquidity).
Transaction en cours
BTC broke support, and my admittedly risky short was triggered.On the 1m we see a significant struggle, with initial rejection from previous support.
If this is a false break, these 3 levels offer some support for a bounce.
Note
Zooming out I see that this 7650 support has been a significant level back to November. I still don't anticipate this to hold, and will remain in position with my first target around 7525.
Further downside targets are difficult to determine, but here was a trade setup I considered days ago, assuming an impulsive downwards move from 9.2k.
The confluence between the 1:1 and previous low makes that area an obvious target for profit taking, should we visit it.
Targets below 7.3 get quite low.
Note
Beautiful interactions with the lines drawn above earlier. RSI is increasing on very low timeframes and I think we'll see a small bounce; but my trade is active with lower targets and a stop above 7730.
Note
I've been having fun scalping this volatility; taking profits and reshorting the bounces. I scaled out most of my position from 7k-6.8k, and will continue to use retracements as opportunities to short again. My next target is 6.6k based on volume profile, and I don't anticipate a significant bounce until then (at the highest).
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