FBlocktrader

Correction incoming? How uptrend breaks fool people

BITFINEX:BTCUSD   Bitcoin / U.S. Dollar
We saw nice gains in the last 6 days, but was it easy to think long all the time?
BTC has pulled off two times the exact same trick to fool people into thinking bearish!
That pattern is "designed" to make it look bearish and get longs out and draw shorts in.
Then of course another big uptrend starts, fueled by people who buy in again and stops of shorts being hit!

In the chart I have shown how the structure works:
1. There is a nice big 1.leg up, clearly uptrend
2. Then several things happen, which make it look bearish:
- break of the uptrend line
- prices move below EMA
- 2 legs down (red arrows)
- finally there is even a support broken after two legs down
3. Now a (big) bullish candle marks the start of a new upward move, which then establishes a new 2. equal length leg up

Conclusion: If you see an "easy" short entry after a strong uptrend in Bitcoin             , think twice and do not expect a big reversal right away.
These bearish structures are often the start of the 2.leg and can be very profitable entries (green arrows), but they are "harder" to take because of the more scary bearish signs.

What is happening right now?
Prices have reached the target of the last 2.leg at 11650. A little double top at 11550 was broken and we have a clear uptrend channel . It might look like super bullish , but this often a point from which a correction starts. The first downside target would be the 11240 level, which is the breakout area. There is also a possible bigger range, which gives a target of 10800.
Comment: The correction did happen and both my targets were hit :)
But this update is not about "I told you so", but about how important it is to think about where precisely the expected move could end. So you can take profits or even trade the bounce.
Also notice the structure I always talk about: Break of trendline and then two legs to new high or low.
Always a step ahead... :)

One question:
Wouldn't 10.8 be a (unsuccessful) resistance test of the longterm downward channel? I see this as a dangerous pull back in the resistance area...
+2 Reply
FBlocktrader EspressoDopio
@EspressoDopio, You are right, when you look at the daily chart we are at the downtrend line, which runs around 10.6 - 10.8k. I agree, there is risk of a bigger pullback to 9000 or even lower.
+1 Reply
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