Bitcoin played catch up over the previous week and went from what appeared to be relatively weak to a dramatic short squeeze that has tested the low 21K area (thanks to a strong S&P). Is the bottom in? Are you going to be lured into this "bull market" as a result of the emotional appeals made by all of your favorite fake gurus? Before you succumb to the fear of missing out, here are some points to think about.
I keep repeating this regularly: NOTHING has changed on the economic front in terms of technical levels or structure. Interest rates appear to be poised to continue to rise and the Dollar appears to be at a range low support within a bullish trend on the larger time frames. As long as this trend stays intact, rallies (in Bitcoin or S&P) have VERY LIMITED potential. Markets are irrational, especially bear market rallies. Buying into a resistance level after a bear market rally is a low probability behavior.
Resistance levels tend to stick in a bear market. Notice Bitcoin now: there is a sell signal that is active from 20,250, followed by another sell signal potentially developing (current candle), in a location (failed high resistance area) where selling activity is likely to appear. The 18,500 area (a support) was less than ideal to be looking for shorts, but 21K is the ideal location in terms of probability and reward/risk. If the lower high is established, then the lower low is more likely to follow (concept of price structure).
Keep in mind, it is important to consider the argument from both sides. As the market provides new information, it is possible that the current bearish argument can lose merit. This is why it is important to maintain an open mind, but to evaluate information OBJECTIVELY, not emotionally. IF Bitcoin can clear 22K, and establish a clear higher low, then the 25K resistance becomes a reasonable expectation. IF NOTHING changes in terms of rates and the Dollar, it is important to note that even upon a more dramatic bullish move, its sustainability is low. At some point the economics will change and begin to favor bullish outcomes, but until the evidence is clear, it is better to be in line with the market intent. Bitcoin does not carry the same weight as the bond market, it is a follower.
I recently shared a short signal from 18,850 that got stopped out. I have since shared a new short signal based on the break of 20,250. The first signal was aggressive because of the less than ideal location. The second signal is the higher probability or more ideal location for such a position. There is NO WAY to know if this trade idea will play out (I do not short Bitcoin, but I share the signals). It is based on the probability of the location which is more favorable compared to a support level. This is also affected by the S&P and Nasdaq. If those markets rally, Bitcoin tends to follow. Both of those markets are also at notable resistances. Do they pull back from here? Only the market can answer that question. The only question you can answer is: are you willing to take the risk?
Thank you for considering my analysis and perspective. I hope you find it helpful.
As always Marc, thanks so much for keeping things real and keeping us all anchored in that reality!
JW911T
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I bet that instead of saying "are you willing to take the risk?" you were toying with the idea of saying "You've got to ask yourself one question: 'Do I feel lucky? Well, do you, punk?" :-)
We could easily go up to 25k and absolutely nothing would have changed. I’m totally 50:50 as to whether the breakout will be above 25k or below 17k. Are there signs to look for before a possible breakout in either direction?