Good morning, traders. I was wrong about a pop back up after price breached the $4900/$5000 level and price has continued to move through lower areas of liquidity and support with only minor pauses. This is why I have yet to take a long position. Emotional trading and/or lack of patience are the most significant reasons why retail traders lose money. While waiting for a good entry doesn't guarantee you will be profitable, it does decrease your risk exponentially. Since trading is speculation, protection of capital should always come before growth of capital.
That being said, we appear to be bouncing out of $4200 which is the next area of support. So, what have I been looking for in terms of confirmation? As I mentioned during the live streams, I am waiting for a nice hammer or other strong bullish candle on the 4H TF, at the least, but preferably on the 1D, 3D, and/or 1W. Additionally, a bullish engulfing candle on one of those larger TFs would also qualify as confirmation of a bounce at the very least. This should be preceded by a lot of very negative sentiment noticeable throughout social media (which I believe we are in the process of seeing). Although volume is higher on this week of downward movement than it has been lately, the reality is that it is very small compared to the Selling Climax in February. This leads me to believe that the current shakeout is a #2 Spring which is most readily associated with a Terminal Shakeout. Whereas the #1 Spring in February is denoted by the large and increasing candle spreads and expanding volume (large drop with large supply), the #2 Spring is denoted by large and increasing candle spreads but only moderately expanding volume (large drop with moderate supply). The question is, is this the 21 or 23 version of #2 Spring? We need to continue watching price action and volume to get an idea.
If you have been paying attention, then you will have noticed that Bitfinex Longs have been increasing steadily during this downswing. Why is this important? Because you should have noticed that a significant number of longs have been liquidated as well. This means that more Long positions are being opened than closed on the down move suggesting absorption. Additionally, Shorts have continued to build as price dropped further. This leads me to believe that smart money is going long while retail is going short. Possible support for such an analysis can be found in social media as the general sentiment is despair and pain. These Shorts will help fuel the move up as much of the supply should have been removed during 2018's accumulation as well as the recent shakeout. Any strong movement back up should see retail traders FOMOing in as well thereby accelerating that rebound. There is no guarantee that all of this will happen, but it remains the most likely scenario at this time, once this shakeout is complete.
The 1D has printed a large descending wedge of approximately $1200 width at its widest so far. This wedge also has the requisite four alternating touches to support and resistance. What does this mean? It means that if price happens to close above the descending resistance of that wedge, before making a new low, then we should be looking for a target of $1200 above that point. Consequently, the recent low and subsequent bounce so far has been a reaction to the 1M OB which I pointed out during yesterday's live stream. There should be an expectation of resistance at $5000 and the bottom of the 2018 TR at around $5800/$6000. A close above $6500 sets up strong additional bullish momentum. There is further support around the $3600/$3700 level.
Remember, you can always click on the "share" button in the lower right hand of the screen, under the chart, and then click on "Make it mine" from the popup menu in order to get a live version of the chart that you can explore on your own.
That being said, we appear to be bouncing out of $4200 which is the next area of support. So, what have I been looking for in terms of confirmation? As I mentioned during the live streams, I am waiting for a nice hammer or other strong bullish candle on the 4H TF, at the least, but preferably on the 1D, 3D, and/or 1W. Additionally, a bullish engulfing candle on one of those larger TFs would also qualify as confirmation of a bounce at the very least. This should be preceded by a lot of very negative sentiment noticeable throughout social media (which I believe we are in the process of seeing). Although volume is higher on this week of downward movement than it has been lately, the reality is that it is very small compared to the Selling Climax in February. This leads me to believe that the current shakeout is a #2 Spring which is most readily associated with a Terminal Shakeout. Whereas the #1 Spring in February is denoted by the large and increasing candle spreads and expanding volume (large drop with large supply), the #2 Spring is denoted by large and increasing candle spreads but only moderately expanding volume (large drop with moderate supply). The question is, is this the 21 or 23 version of #2 Spring? We need to continue watching price action and volume to get an idea.
If you have been paying attention, then you will have noticed that Bitfinex Longs have been increasing steadily during this downswing. Why is this important? Because you should have noticed that a significant number of longs have been liquidated as well. This means that more Long positions are being opened than closed on the down move suggesting absorption. Additionally, Shorts have continued to build as price dropped further. This leads me to believe that smart money is going long while retail is going short. Possible support for such an analysis can be found in social media as the general sentiment is despair and pain. These Shorts will help fuel the move up as much of the supply should have been removed during 2018's accumulation as well as the recent shakeout. Any strong movement back up should see retail traders FOMOing in as well thereby accelerating that rebound. There is no guarantee that all of this will happen, but it remains the most likely scenario at this time, once this shakeout is complete.
The 1D has printed a large descending wedge of approximately $1200 width at its widest so far. This wedge also has the requisite four alternating touches to support and resistance. What does this mean? It means that if price happens to close above the descending resistance of that wedge, before making a new low, then we should be looking for a target of $1200 above that point. Consequently, the recent low and subsequent bounce so far has been a reaction to the 1M OB which I pointed out during yesterday's live stream. There should be an expectation of resistance at $5000 and the bottom of the 2018 TR at around $5800/$6000. A close above $6500 sets up strong additional bullish momentum. There is further support around the $3600/$3700 level.
Remember, you can always click on the "share" button in the lower right hand of the screen, under the chart, and then click on "Make it mine" from the popup menu in order to get a live version of the chart that you can explore on your own.