BTCUSD Vs. XBT: Levels For Oncoming CBOE Futures Volume.

BTCUSD update: Price is not far from the all time high of 17171 just hours away from the start of today's business on the CBOE. This is when more volume will enter the market and have a more significant effect in either direction. In this report I am going to highlight what to watch for at the two upcoming resistance levels.

17171 and the price range up to 18300 are the areas to watch closely which this market is likely to test. Since the futures have opened, price momentum has been bullish and has taken out the minor resistance zone between the 15500 to 16230 area (.618 of bearish structure). What many do not realize is that volume in the futures market outside regular business hours is often much lower and if these contracts are going to have any effect, it is more likely to happen during the day session.

The reason why these levels are important to watch is because today, many more shorts will be able to enter this market compared to the absence of shorting ability by most U.S. participants. A bearish reversal candle off of the 17171 high will be viewed as a potential double top. While the reversal zone just above is where price can spike to a new high, attract all the breakout traders and then fall apart. This often begins with a pin bar, or outside bar which is likely to happen below 18300. If price breaks above this upper boundary, then 20k becomes a much more likely target.

If there is a correction, the 14250 to 13575 zone (.618 of current bullish swing), and the 12700 to 11550 area would be the range to look for bullish reversal patterns. Again these levels offer the most attractive reward/risk for smaller time frame trading and not investing. In other words, if you are looking to buy, these are the higher probability levels to evaluate IF price manages to retest them.

At the moment, this market is not showing any signs of significant weakness or reversal patterns. It is still too early, but that may change during the day session of the futures. There is no way to predict what will happen. The best you can do is isolate a couple of possible scenarios and see if the market cooperates, then measure risk from there. This is the short term trading mentality and what you will be competing with when the futures traders really enter this market.

In summary, I expect the CBOE futures along with the CME next week to bring balance to a market that is moving 2500 points a day. People entering this market now are entering with extremely unrealistic expectations and are only looking at, "Wow, 1000 to 17000 in less than a year!". In the long run, I do believe it will go higher, I have been long term bullish the entire time. It is the short term that people do not understand and will require more skill to navigate. I do not think the futures will cause a major sell off, instead I think they will enforce reality which means more realistic ranges and movements. Retracing 5k in two days and recovering it is amazing, (unless you bought at 17000) but it is not reality. Whether you are investing or looking to trade shorter time horizons, knowing what is more likely to happen based on price action will improve your timing but there is an undercurrent of ignorance that the professional futures traders are going to capitalize on. And that is the lack of risk management which is typical of new money entering hot markets near highs. The hype will attract this money and the professionals will take it out and this is what the futures will facilitate. Just something to think about.

Comments and questions welcome.