BTCUSD:Retrace To New High Or Initial Leg Of Broader Correction?

BITFINEX:BTCUSD   Bitcoin / U.S. Dollar
BTCUSD update: Retrace to 15675 could be the initial leg to an oncoming correction, or it could be just another higher low that can push to 21K . Knowing which scenario will unfold is a matter of evaluating price action at 3 important levels which I will cover in this report.

The bearish pennant formation that I wrote about in my previous report has evolved into a bearish flag formation. which has not been broken since the lower boundary (15675) has just been established. At the moment there is a bullish pin bar which can change dramatically since there is a lot of time before this candle closes, but if it completes showing this formation, that is a sign of reversal, especially if there is supporting structures on smaller time frames like a double bottom . IF the 15675 low is taken out instead, then more selling is likely to follow which can lead price back to the 14450 area (.382 of the current bullish structure). That is the projected support level I am interested in for a swing trade long.

Also a retest of the 15675 low and failure to break lower will also result in a larger time frame double bottom and attractive area to get long because the first projected resistance is at the 18290 to 18938 area which is the .618 of the new bearish leg. That is almost a 3K move without even having to retest the 19891 high. That is a much better scenario than just buying any price randomly like so many have been doing recently. It is better because in the long run, waiting for clearer opportunities that offer defined risk and reward potential keep me out of trouble.

As far as shorts, there are now 3 levels to evaluate for reversals that can offer attractive reward/risk on the short term (since this market is still moving a thousand points a day). The retest of the 18290 to 18938 followed by a failure would establish a lower high which can lead price back to the 14000s. A retest and failure of the 19981 high would establish a double top which can take prices back to at least the 15500 area. And the third level is the 20950 which is the upper boundary of the reversal zone (which is a proportion relative to the 15675 low). Wait, isn't 20950 a new high?

Price can attempt to break out, and instead fake out slightly higher than the previous peak. This is the false breakout scenario which I like to call the double top variation. It attracts a lot of longs because of the breakout, but not enough to keep price going.If a reversal pattern like a pin bar appears within the reversal zone, I would interpret that as a sign that price is again likely to retest the 15500 area. IF price breaks beyond the reversal zone boundary, then I would stay out of its way.

In summary, this market has reached an interesting technical area. 3 potential resistance areas that can lead to selling all while gyrating around a 2.618 projection target and exhibiting a bear flag formation. Putting these puzzle pieces together creates a context for further evaluation. That is where your trading plan must take over to guide the decision making which is the essence of short term trading. These scenarios are not absolute predictions, but instead possibilities that offer attractive reward/risk on both sides of the market. It all depends on how the market behaves at these measured levels, and your plan must help you interpret the price action. This is why being flexible and NOT opinionated is so important. Adjusting to the market based on what IT chooses to do is what "listening" is all about, and that is what leads to better trades whether they are profits or losses (small losses are good trades by the way).

Comments and questions welcome.

Nasdaq Twitter Interview Update: So I went to NASDAQ and when I got there, they changed their mind as far as going live and conducted the interview to be posted an hour or so after. It's still not out yet. As soon as it is out, I will update everyone. Sorry for the false advertising.

Marc Principato, CMT |Author: Analyze Any Financial Market Like The Pros Using Price Action| | Cofounder (S.C.)

Interesting. How does this type of analysis take into account new news (BCH goes on to Coinbase causing miners to move to BCH, Charlie sells all his LTC, etc), or the fact that it's the end of Q4 where people want to lock in profits for reporting, or the last trading day of CME before holidays (when selloff occurred) etc? Or is TA combined with other methods in some matter? Trying to learn about this, thanks.
I like your analysis. It is simple and clean. Not like many other authors out there which have too cluttered charts and you don't understand what they mean.
So FKing right !
What needs to happen for confirmation of a double bottom at 15600 and 15500 area?
Very nice indeed! :)
Loafer88 Walentine
@Walentine, quit spamming other people's posts with your charts. Second time i've seen your chart on other people's boards
+7 Reply
Walentine Loafer88
@Loafer88, dude, this is a community!! no spam!
+8 Reply
Very helpful for me. Thanks Marc. Waiting for the NASDAQ link.
+1 Reply
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