rzmb44
Long

Good Chance of a Cycle Low in Bitcoin

COINBASE:BTCUSD   Bitcoin / U.S. Dollar
It's day 28 of the 30 day cycle and after going down to $5800 this morning, we ran out of sellers, buyers started coming in and squeezed all the stops to make a quick run up to $6200 area that is holding nicely.

This chart is a daily and though we have 6 more hours before it closes, if we get a close with this kind of wick then I'd consider this to be a very high probability of a reversal candle.

I do not think this THE low, but its too early to tell. I'm expecting this bounce to be a bit bigger than the last 2. At first we should go to $6700 area and probably get stuck at that resistance. Then I expect we'll go to the $7100 area and test that break down and possibly test the downtrend line. This is the important area for bulls and bears to do battle. If the bulls can get a close over that trendline , then we might have something, but I believe that is less likely than another run lower for the next cycle which is the 60 day. But again, we'll wait to see what happens if and when we get there.

I was stopped out of my short position on that squeeze, but still in good profit as I was short from $7700 and reshorted at $6700. I've taken a long position that I will try to build up if we get a few dips. As long as we close over $6100 on the daily I'm bullish . And I'd rather not see an hourly close below $6100.

If for some reason we just go back down and close fairly low today I'll rethink my position.
Comment:
A bit of a neutral close here. So we have an bit of a long wick but still red. Tomorrow needs to trade above $6200 and even better, close above the daily high.

That would be a good confirmation. As you can see in the shaded candles, a long wick doesn't mean a reversal if we don't' get follow through.

My biggest concern is that this rally really didn't have a lot of volume, it just squeezed a bunch of shorts for about $300, flagged all day and no attempt at a 2nd rally that you would normally see a reversal.
Comment:
I was actually wrong when I made that count. It was day 26 not 28.

Today is actually day 28, so we could easily dip for another 1-3 days before we get the cycle low. The wick showed reversal but the follow through has been lacking. No real confirmation so hard to buy this bottom. We get a piece of good news and get some buying but every rally has been sold hard.

I had a long sold it and now I'm flat. A bit to low to go short and not enough confidence to go long. So I'm basically neutral.
Comment:
Its day 30 and we are getting close to day 26 hows. I would not be long right now. When we failed to gain momentum after some good news, that was a bad sign. Started to look like a bear flag. Now broke down. I doubt the low holds. More likely we are on our way to make the daily cycle low on the long end between day 30-35. I would definitely stop out if you are long and wait for more confirmation.
Comment:
So we actually got a new low today at least on some charts. If not, I always count a double bottom as the cycle low. After this short squeeze, I'm confident this will be a cycle low. So I expect we go retest $6600 and maybe even $7100.

Then I expect it to roll over 7-12 days to make a major low sub $5500. Tricky to trade. I had short and was topped on that blue line break but certainly wasn't long. If I play a long at this point, it will be a small position but I'm generally looking to go short a bit higher.
Comment:
Just to clarify: Bitcoin has 2 major cycles.

60 day cycle: This is always a low point
30 day cycle: This is a pivot (high or low)

I track the 30 day as it helps get in and out of shorts and helps me take profit. This is less important during a strong bullish period. I rarely trade 30 day cycles when we are trending up. But during this bearish chop, It got me into great positions the last 4 months.

I believe there is a good chance we get a rally here then move down to finish the 60 day cycle with a lower low below $5700 for a few reasons.

1. Would give us the 60 day cycle low
2. Looking at historical parabolas the ideal low for 2018 would come between July and September.
3. I believe the bottom will have capitulation. We have not seen that yet.
4. There are some areas down around $5k that never were tested on the move up.
5. We broke major support at $7200, $6200 and $5800 so it would be rare to not test lower prices after this breakdown.

I would say 75% chance it happens. Usually when you make a lower low in a cycle it will be left translated. That means the high of the cycle tends to come before the halfway mark (15 days). So I think 7-12 days it will start making its move down.

So there is this 25% chance that I'm wrong. It's important when you have a bearish bias like this to focus on "what if I'm wrong?"

If the 60 day cycle low at the end of July is higher than yesterday's low, that is bullish. If we had a daily close over that orange line, then that gets me even more bullish. If those occur, I would likely be in a short position and I would cover and wait for the cycle low to go long.
Comment: Last thing to note. I want a major hard, big wick low at the end of next month or end of September.

Markets work like a rubber band. If we stretch that chart down and get fear and capitulation then all the traders, late comers get flushed out of the market. The only ones left are the long term hodlers and believers. They provide a strong floor on the market and It sets up a powerful rally.

If we don't get a capitulation low in July or September then we are in for a very boring sideways range action and a much longer extended bear market. If we trade like that this fall, we could end up extending a bear market for another 25-30 weeks (January to March 2019).
Comment:
Here are the two highest probabilities I see playing out.

1. Blue - $6800 area had heavy volume and is a demand area so I think it will be hard to get above. If it takes us a few days to get there then we might plod along and eventually break down and head towards the cycle at end of July.

2. Purple - $7100 - Here we move up another a little higher for a few more days and test the break down. its also possible we test the diagonal trendline. Then move down to make the lower low.

Can we break down from here? Yes. That would be very bearish and I would heavy sell a break of $6000 at this point. We could easily retract 50% of this move and up to .618 but if we go lower than that, I would not be a buyer, I would look short then add to short ona break of $5700. If we turn down this fast, then we'd have about 25 days of downside left, which would undoubtedly give us some capitulation.

Can we go higher? Yes. This is the lowest probability and not my favorite scenario based on where we are at in the 60 day cycle, but if the market is starting to turn or go into a sideways accumulation stage we could go bullish. Most of the time the 60 day isn't higher than the 30 day cycle, but it is possible. If we had a 4 hour candle close over $7300 then I'd get bullish. I would not buy a long there. I would stay in cash and wait for the next dip at end of July to build a position. So maybe go up to $7800 then pull back and retest $6800-$7100.

The trend is down so taking a long here is a countrend, which means for me this a small trade. I only do this because we are early in the cycle. I'm holding a small long I took when we first broke up and consolidated but looking to add if we get a drop but still keep this small. Once we get to $6700-$6800 I'll start working on a short.
Comment:
As I originally stated, we'd get stuck at $6700 because of the volume profile and a strong resistance area. We've come up and now pulled back.

At this point, I don't see enough to suggest that the short term top is in. This break down hasn't had much volume and we've held held good support now for 12 hours above $6400, so chances are still good that we make another run up in the coming days to try to break the $6700 area again and test $7100. $6700 has a lot of sellers so if it holds and shows bearish signals I'll look to build a short.

It's been 6 days since the low so we are getting close to the ideal time to rollover. Today would be a little soon, but not impossible. if I had to make a guess then I'd say we keep making more attempts at $6700, possibly get one more slightly higher high or break and test $7100. Then start breaking down sometime between July 6 and July 10. If we are still making a bullish pattern after July 10 then I start looking signs that this is going to be a bullish formation.
Comment:
As I suggested this morning, this drop wasn't convincing. Didn't take long before a bull break took us up to a new local high just over $6800. We've pulled back to $6700, but I expect we'll just retest this break up around $6660 area and then move up to attack $6800.

So now we can make a plan for the coming week and rest of July.

I will look to short at the next move up to $6800 but I will have a stop loss at $6880. If we move much past $6800 there just isn't enough volume history to suggest we'd hold that level. Not unless we test it multiple times and fail. I'll also look or signs of losing momentum to tell me when I can take a bit more risk.

If I get stopped at $6800 I then I'll look for $7050. If we get up here it gets tricky. The first shot of shorting $7050 is to see if we get sellers shorting the breakdown point. If this doesn't hold then I'll go flat and watch what happens between $7050 and $7300. This orange neutral area is where I need to watch price action. There is no good area to short between $7050 and $7300 without having too big of a stop. I'll talk more about that if and when we get there.

Closing above that green trendline and in that green box is bullish and my medium term scenario of new lows below $5700 would be invalidated. Let me stress, I can have a bias but if the market doesn't validate my bias I will not continue to try to trade it short.
Comment:
We reached our $6800 target and I'm in a short position. it's still fairly early in the cycle so I would not be surprised if we backtested that channel line up near $6800 again, but if this market is too weak then we could be starting to roll over already which means we could move down 20-25 days.

I still have a stop at $6880 as its early enough that we could very easily see one more push higher. And it may just chop around for another week before we see extended selling. And of course if we just dip here and make a move up it could get to $7100 area before its ready to move down. So I'll just sit back here and watch how it unfolds. If we reach the $6100 mark, I'll add to my short position as I'd be in a position of strength and the probability of breaking new lows would be much higher at that point.
Comment:
It's always a good idea to be aware of the bullish case. I've seen others point out a potential IHS, which is way too early. But if we happened to create a shoulder with a good volume profile and then broke up towards $7k and stayed up there after July 15th, I would definitely be cautious of shorting and be looking for a potential bullish move to $7800 where the daily cycle low would retest the trend break. I would look to go long there. I find this scenario unlikely but we must remain aware.

A long time ago, I had a mentor give me a piece of advice. Instead of patting yourself on the back about making a good trade, try to figure out the scenario where you would be wrong. This is the type of price action that would have me favoring the bullish scenario.
Comment:
Still early in cycle and no break down. Buying support below us so if it holds, I could see it trading in the rangbe between $6400 and $6750. It might also just backtest that wedge line.

The big clue is time. It's just a tad early to drop down. So you shouldn't be at surprised if we stay up here another 3-5 days before we get the breakdown. If we fall below $6400 then thats the first sign its really ready to fall.
Comment:
Well, I had a feeling we'd try to make a move up. And we did.

Unfortunately for bulls this now poses a problem. The move up this morning retested the wedge breakdown. There was low volume on the candle and it has been rejected hard.

Because of this price action. I'm adding to my short and will put a stop at the high of that candle. Here lately this type of rejection has precluded a larger move down so the risk reward is worth it here as my stop can be close.
Comment:
Bitcoin has been coiling in the $6400 to $6800 range for 4 days and in this $6450 to $6600 area now for about 2 days.

My guess is that bitcoin will make a big move one direction or the other. I am currently short but I have a stop set at $6670 now. Otherwise if we get an hourly close over $6600 I will also get out of the way.

The HS is forming. And my bias is towards the downside. BTC longs are fairly high so its set up to dump, but I've seen tight coils like this fool everyone and violently break up. This one almost looks too obvious and I still think we are a tad early to drop, so I just would not be surprised if we had one more pop up. Thats why I moved my stop and I'm being a bit cautious about my short.

So if we drop below that orange triangle on an hourly close, I'll add to my short. I'll also add to the short below the neckline. If we close above the triangle on an hourly close I cover even if we don't make it to $6670. Worse case scenario I look for a new short entry.

One strategy to use when you get a tight consolidation and triangle is to bracket orders. The big problem I have with this strategy is that bitcoin has been volatile lately with "spikey" fake out moves so you can get caught in a fake breakout, so be careful.
Comment:
As I suspected we broke out and had a big move. I protected my position and will not just be an observer. I'm looking to see if we consolidate then make a move to $7100. If I see signs of wainint momentum I'll put back on my short and put a stop above $6880 original stop loss.

A new high today fits well. We backtested the wedge as well. $6800 area again is good resistance. It can be breached but this could be it for the rally, but I want to see a good pause. often when you get a move like this you get consolidation for 1-4 hours then get a second surge up. If we just drift down, that would be a bearish sign.
Comment:
This is what I mean by drift down. We spiked up on these 3 occasion and just drifted down. If this happens, we 'll likely top.

Comments

once again your work is exceptional . Thank you for the recommendation of Chris Carolan. I am an old floor trader too. My the trading gods bless you with riches and wisdom

BBD
Reply
rzmb44 BBD2017
@BBD2017, Thank you. Awesome and please continue to share your thoughts. I'm sure I could learn a lot from you.
Reply
Thank you so much for posting your work. I wonder is there also a component of full moons or new noons in this cycle work. Thanks again for sharing your research. BB D
Reply
rzmb44 BBD2017
@BBD2017, Good question. I would recommend looking up Chris Carolan. He's a very good cycle trader that incorporates a unique solunar model and a spiral calendar. I believe it hit the bitcoin top on the exact day.

https://twitter.com/spiralcal
Reply
Been following for awhile and wish I’d taken some of your advice more often than others. Question: why do you predict a “roll over 7-12 days” when, based on your discussion of the 30-day (-ish) cycles, I would have thought we would make a cycle high in another 25-30? Can you explain your logic more? TIA
Also, go Rockies :)
Reply
rzmb44 pantalons
Reply
rzmb44 rzmb44
@rzmb44, In this post I explain a bit more about the longer term weekly cycle. I'm looking for a major low in that time period. ( I said August to September but really late to July to September would be more accurate). If we get capitulation at the end of next month then I think it will market the bottom, especially a big wick down to $3000 area. That would be ideal.

If we just make a soft low at like $5500 or $5000 and don't get big volume daily bar, then it might take another 60 days to make a low. But we'll know more as we watch price action in those months.

If we make a higher low at end of July then this scenario has a much lower chance of playing out.
Reply
@rzmb44, I get it now. Thank you for clarifying. Was picturing the cycles as either higher or lower per each cycle compared to previous, but I see them as pivots now.
And thanks for the clarification on time frames too—if higher low at end of July, mushy low and longer wait for big time low vs a quicker wick and shorter time frame to turnaround.
I bet it’ll be scenario one, if we don’t get a higher low at July end. Only bc that sounds like the “maximum pain” I keep hearing about.
Now to see if I have the stones to take the necessary actions based on this info... (have been buying over the last 8 months across the sector... :( )
Reply
rzmb44 pantalons
@pantalons, I still think accumulation at these low prices is a great strategy. I short and long but I am very much a long term crypto bull and I believe $50k before 2020 and over $100k in 3-4 years.

I trade, but also have long term positions and even if I believe we get lower prices, I buy a little bit because there is no way I'll ever be 100% right. My ideas here are just about probabilities using TA and timing indicators, which has helped me great trades since $15500.

I started writing this just to have a journal and show something to some friends that trade with me so they know where I stand. Anyone else that follows I hope I can help them get into a better position and make more money. We don't have to be 100% right to do better than buy and hold. Just be wise, use stops to manage risk and always look for "what if I'm wrong?" scenarios.

it will be hard to buy the bottom if we capitulate. I will just layer orders and if we don't bounce quickly, then they go into my long term holdings. If this $5700 was the bottom, that is fine. I did not see enough evidence here for me to buy heavy so would not have any regrets. When I buy a bottom I want to see real evidence. Either it capitulates during a cycle low or I wait until we get bullish confirmation. I want to see the weekly turn, closes over strong resistance and see the daily form a good swing low with volume.

I want to buy the bottom, but if bitcoin is at $100k in under 5 years, I won't worry about whether I waited for confirmation at $7500 rather than buying a soft low at $5700.




Reply
@rzmb44, OK so where are we in the cycles? Are you expecting a pivot here in a couple days or was that previous one too long/short to make a good prediction? I am long from $6400 with a tight stop but can't seem to make heads or tails what this market wants to do. Thanks for your thoughts, always helpful (and in other posts too).
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