Bitcoin: Too Early To Buy Pull Back?

18 avr. 2021

Bitcoin clears 58K support and goes straight to the 51K area. If you read my recent articles on here, I warned over and over that the risk was too high in the 60Ks. One very simple rule kept me out of this: I don't buy highs. Now maybe you will better understand what I mean when I say RISK FIRST.

How many gurus steered you the wrong way with the typical hype and false sense of hope near those highs? I watched countless videos on Youtube that were so feverishly bullish, that it was very hard to ignore the painfully obvious contrarian signs. The herd mentality at its finest. No one emphasizes the risk, maybe because they aren't aware of the magnitude or maybe they know they won't get as many views if they speak of the R word: reality.

Next you may wonder, "is this the time to buy more?", "buy the pullback?", it's still a bull market right? All that really positive news, right? Here is the answer: while the location (between 51 and 55K) is much more attractive, it is still too early for swing trades at least.

There is now a failed high formation established off the low 60K area off of a high probability reversal zone (blue rectangle). The pullback is sharp, and while the location has improved, I would not get involved until stability appears. Meaning price can test 50K again, or even slightly lower over the coming days. Or maybe it establishes a higher low, either way I want to see a bullish formation develop. The outcome from buying a level alone is HIGHLY random and that is not something I am interested in. Stability takes time, and a single candle is not enough to work with. Either Bitcoin aligns with my rules, or I don't assume any risk. Very simple.

This type of move is good for day trades (you need to stay on top of it) or position trades (investment). Since the retrace is dramatic, it offers an improved price to take a SMALL bite, relative to your allocation objective. Meaning if you have 1K to invest, this is an opportunity to buy $50 to $100 worth or 5 to 10% of whatever your full amount is.

Why such a small allocation? Because at this point, IF bearish momentum stays intact, it is possible to see a test of the 50 to 48K area.

Many of the "experts" will probably turn bearish on Bitcoin now, but it is still too early for that also. Until major supports are taken out, like 48K and 40K, the broader structure is still bullish. That means it still makes sense to look for swing trade longs at support levels upon a setup and confirmation.

In these situations it is easy to let emotions take control, especially if you were lured by the hype. If you are too big, the best thing to do is reduce risk while you have the opportunity. The smaller the loss you can take the better. It will be frustrating if Bitcoin reverses back to 60K, but the idea is to not be at the mercy of the market which is often the long term result of hope. Focus on risk FIRST.

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