Bitcoin is in a bear market. That is a FACT. However, there are still different ways on how Bitcoin's next move can play out.
In just a bit over 10 days, Bitcoin has broken it's major support level and headed all the way to less than 4000$. Although this might seem like a tempting place to buy for "cheap" and go long, we must remain calm and see what the charts are telling us.
Before we proceed, let me introduce you the "Elder's favorites" indicator, which contains different indicators made by a famous trader, Dr. Alexander Elder. The main one I am going to talk about are the bars. The indicator uses EMA and MACD indicators to determine whether we can go long/short or not - you can see that my bars have three different colors: red, blue and green. These bars don't tell us what to do, it tells us WHAT NOT TO DO. The meanings are following: RED BAR means that we are allowed to SHORT or STAY NEUTRAL, but we are PROHIBITED to go long. BLUE BAR means that we are allowed to do anything - go LONG, SHORT or STAY NEUTRAL (this also implies the use of other indicators to give you a specific direction to take; in case of interest, more about that on other posts). The GREEN BAR means that we can go LONG or STAY NEUTRAL, but we are PROHIBITED to go short. In order to use this indicator, we take 2 timeframes; in this case, the weekly, the long-term chart and daily, the short-term chart. In order to make our move, the two timeframes need to MATCH. This means that if on weekly timeframe we see a RED BAR, but on daily timeframe we see a GREEN BAR, we are not allowed to go short, YET. We need to wait for the daily chart to turn BLUE (neutral) or RED (short). Same with going long - if both timeframes allow the long, then it means that we are allowed to go long.
When we look at the two timeframes, we can see that the week from 5th of November, the time before Bitcoin dropped, didn't allow us to go long, saving us from big losses. For now, we are allowed to go short, but we have ruled out any plays for long.
On the Weekly MACD-Histogram, we made a huge jump below the zero line and by the looks of it, the downwards pressure is increasing. This means that looking at the longer, we are continuing to head lower. The daily MACD-histogram is rising and the Stochastics are showing oversold levers, meaning that there can be a small jump up for Bitcoin sometime during this week. However, with volume oscillators, we need to keep in mind that during strong BULL or BEAR markets the oversold and overbought levels simply don't work that well, since the momentum behind these moves is too strong.
If you are trading with higher leverage (over 5-10x), then you should short from the higher price, potentially near the 3900-4100$ or higher, when stochastics and MACD-histogram have shwon more movement. This decreases the possibility of a liquidation, but the risk of missing the next big downwards move is there, though the reward will be bigger. Currently, however, I suggest to be more conservative and keep higher leverages only for scalping; if you trade with market prices and go short with lower leverages with enough collateral, you can endure the potential bounces and even short the rallies.
The targets can be, once again, the support lines near 3500$ or 3000$, depending on the strength of the movement and your trading personality (it can also be lower, just remember to set some targets for profits).
Don't worry about smaller fluctations when the trend moves against you. For now, we look at the weekly timeframe and it tells us to go short. When the weekly MACD-Histogram begins to fade (when no moves happen in 1-2 weeks), meaning that the trend is sideways, we exit the trade and wait for a better trading opportunity.
There is a high probability of Bitcoin dropping further and the safest way to get on the board of the next big move, which should happen in around 1-2 weeks, is to short it. However, if the price raises to/above 4300/4400$, we need to be very wary (it can also be short squeeze) and relook our positions. In case of any big move, I will update here.
In just a bit over 10 days, Bitcoin has broken it's major support level and headed all the way to less than 4000$. Although this might seem like a tempting place to buy for "cheap" and go long, we must remain calm and see what the charts are telling us.
Before we proceed, let me introduce you the "Elder's favorites" indicator, which contains different indicators made by a famous trader, Dr. Alexander Elder. The main one I am going to talk about are the bars. The indicator uses EMA and MACD indicators to determine whether we can go long/short or not - you can see that my bars have three different colors: red, blue and green. These bars don't tell us what to do, it tells us WHAT NOT TO DO. The meanings are following: RED BAR means that we are allowed to SHORT or STAY NEUTRAL, but we are PROHIBITED to go long. BLUE BAR means that we are allowed to do anything - go LONG, SHORT or STAY NEUTRAL (this also implies the use of other indicators to give you a specific direction to take; in case of interest, more about that on other posts). The GREEN BAR means that we can go LONG or STAY NEUTRAL, but we are PROHIBITED to go short. In order to use this indicator, we take 2 timeframes; in this case, the weekly, the long-term chart and daily, the short-term chart. In order to make our move, the two timeframes need to MATCH. This means that if on weekly timeframe we see a RED BAR, but on daily timeframe we see a GREEN BAR, we are not allowed to go short, YET. We need to wait for the daily chart to turn BLUE (neutral) or RED (short). Same with going long - if both timeframes allow the long, then it means that we are allowed to go long.
When we look at the two timeframes, we can see that the week from 5th of November, the time before Bitcoin dropped, didn't allow us to go long, saving us from big losses. For now, we are allowed to go short, but we have ruled out any plays for long.
On the Weekly MACD-Histogram, we made a huge jump below the zero line and by the looks of it, the downwards pressure is increasing. This means that looking at the longer, we are continuing to head lower. The daily MACD-histogram is rising and the Stochastics are showing oversold levers, meaning that there can be a small jump up for Bitcoin sometime during this week. However, with volume oscillators, we need to keep in mind that during strong BULL or BEAR markets the oversold and overbought levels simply don't work that well, since the momentum behind these moves is too strong.
If you are trading with higher leverage (over 5-10x), then you should short from the higher price, potentially near the 3900-4100$ or higher, when stochastics and MACD-histogram have shwon more movement. This decreases the possibility of a liquidation, but the risk of missing the next big downwards move is there, though the reward will be bigger. Currently, however, I suggest to be more conservative and keep higher leverages only for scalping; if you trade with market prices and go short with lower leverages with enough collateral, you can endure the potential bounces and even short the rallies.
The targets can be, once again, the support lines near 3500$ or 3000$, depending on the strength of the movement and your trading personality (it can also be lower, just remember to set some targets for profits).
Don't worry about smaller fluctations when the trend moves against you. For now, we look at the weekly timeframe and it tells us to go short. When the weekly MACD-Histogram begins to fade (when no moves happen in 1-2 weeks), meaning that the trend is sideways, we exit the trade and wait for a better trading opportunity.
There is a high probability of Bitcoin dropping further and the safest way to get on the board of the next big move, which should happen in around 1-2 weeks, is to short it. However, if the price raises to/above 4300/4400$, we need to be very wary (it can also be short squeeze) and relook our positions. In case of any big move, I will update here.