Bitcoin: 8500 Still On Radar But 6850 Must Not Break.

29 déc. 2019

Bitcoin is poised to break out, but needs to clear the high 7600's decisively in order to clear the way for 8500. Price action continues to gyrate within a very wide support zone and the development of the recent failed low structure is exactly the type of broader reversal pattern that we want to see in such an area. The point of this article is to shed light on the technical points that we consider when adjusting to new market information and to provide some broader context and perspective for the community.

I want to thank Reece from Australia, Charvey, Troy Brave (actually met him back in March of 2018!), and everyone else who shared positive comments and constructive feedback about my recent video update. My goal is to publish one of those each week which will serve as an update to these written articles.

So here are our technical points:

1. The broad failed low formation between the low 7Ks and the recent 6450 low is a reversal pattern that has materialized within a major support zone. This is what a market bottom looks like and IF price breaks major resistance levels like 8500, 10,300 and etc., then this structure will confirm the broad Wave 2 bottom that we have been WAITING over 6 months for.

2. There is minor support around the whole number 7K. As long as price can maintain this support, it is likely to squeeze higher. The next minor resistance is in the high 7600's. A decisive break and close above this level can stimulate enough short covering to take price to the 8500 resistance level in a matter of hours or days.

3. Can Bitcoin test lower prices? Anything can happen, BUT price would have to close below 6850 in order to prompt a retest of the 6550 reversal zone boundary. Any bullish reversal pattern in these areas would offer compelling swing trade and position trade opportunities based on the criteria of our strategies.

4. Recent candlestick price action (the bearish pin bar followed by the bullish pin bar) is noise. It is the levels (price location) that carries more weight in this situation and they continue to favor bullish reversals in terms of probability. (In other words, shorts are very HIGH risk).

5. Until the 8500 and 10,300 levels are taken out, Bitcoin price action is still within the boundaries of the "corrective consolidation" that we have seen since the 14K peak. This is relevant because it keeps our expectations within the range of tendencies associated with a range bound environment (lack of follow through, erratic price action, low quality signals, etc). Everyone wants to hear 20K by tomorrow, but price structure does not agree YET.

6. We have preset profit targets in the high 7Ks, mid 8Ks and low 9Ks, BUT any large time frame sell signal that appears near a major resistance level will prompt us to consider a manual exit. In a trending environment it is usually better to let a winner run, the problem is Bitcoin is NOT in a trending environment.

As the market unfolds and provides new information, perspective adjustment is necessary BUT that is not the same as reacting to new information. "Reacting" such as jumping into a new position, or exiting a position is usually motivated by fear. And fear is the key stimulant for the majority of market participants (the herd). Adjusting perspective means figuring out your decisions or actions in advance: "IF Bitcoin does this, I will do this." In the second example, you are not reacting out of fear because you have evaluated the possibilities in advance and have an idea of what is reasonable to expect.

This is not a game about being "right" or predicting the future. It is about managing risk, that's it. Our strategy can produce a string of losses (which it has) but only requires one or two wins to get back to even or ahead. That is how you win when it comes to short term timing. That is why we gauge probabilities based on the price information the market provides and ADJUST them as new information becomes available. Eventually these probabilities align with our reward/risk criteria and we can justify a trade. This is a process, and it has no easy button.

Have a happy, healthy and productive new year and thank you all who have been supportive of my efforts on this platform. Let's make the new year a more informed one.