BTCUSD: Lower Prices Likely? Unless Reversal Pattern Appears.

24 févr. 2018

BTCUSD update: 10429 minor resistance has held and price is now retesting the 9600 support. Unless this market can show a reversal formation on this time frame, price is likely to push lower.

Like I highlighted in my previous report, the lone bullish candle (that at the time of writing was a spinning top but closed stronger), was never able to close above the 10429 resistance (.382 of current bearish swing). Closing above that level is the signal that I require to confirm that bullish momentum is back.

The 9604 level (.382 of current bullish swing) and convenient location for a Wave 4 bottom is being tested again. One bullish reversal formation that I would like to see is the failed low in this area. That is when price goes slightly lower than the previous close and then closes strong. In this case, IF this scenario were to unfold, the next candle should be a pin bar, or engulfing candle. If this occurs I would consider adding to my position.

What if you took the aggressive long swing trade that I described in my previous report? It is possible you have been stopped out if you used the 9600 level as your reference point. Remember swing trades and position trades are not the same. They each operate on different time horizons and carry different risks. People that trade smaller time horizons often take on larger positions faster and is why a stop must be used in order to control the increased risk. Position trades are accumulated over time and are more in line with principles of longer term investing. This means numerous small positions add up to an aggregate position with an average price. My risk is controlled through strategic sizing rather than a stop which allows the bigger picture to play out and not get kicked out of a position too early. The risk in this type of trade can be bigger, especially if the overall outlook or premise changes. I understand and accept these risks.

What about the Wave 4 bottom? The current support area is a convenient place for a Wave 4 to Wave 5 transition to take place, but does not mean it will. Typically, wave 4's are tricky and can include numerous false starts. Keep in mind as long as the low of Wave 4 does not over lap with the high of Wave 1, the bullish impulse wave is still intact (which means there is plenty of room for a minor double bottom or failed low formation). IF price action over laps with the highs of Wave 1, then the impulse would be negated and the market would be signalling more of a range bound condition rather than a trending one.

In summary, as long as there is no reversal pattern, it is reasonable to expect price to push into the low 9Ks or even retest the 8174 to 7230 minor support zone (.618 of recent bullish swing). Before I add to my position trade, I would like to see a solid form of bullish confirmation such as a double bottom or higher low off of the current level. Unless I see that, I will just sit on what I have and wait. As a trader or investor, you must always be prepared for anything because nothing is certain in any financial market. If this market falls apart, I can handle it because I am sized appropriately to my risk tolerance. If you can't handle it, that means you are in too big and lack a well defined plan. I cannot emphasize enough that if you cannot handle losses, then you are in the wrong game. The ability to embrace risk is what facilitates rational position management and trade criteria no matter what time horizon you are participating in. The inability to lose is what facilitates fear, and scared money never wins. When it comes to timing financial markets there are countless pieces of information to consider and compare, and it can be confusing to say the least. To help clear this confusion, begin with broader time horizons and a focus on risk. Participation may be much less eventful, but the outcome will be more in line with best practices which often lead to more positive outcomes.

Questions and comments welcome.