Seth-Goldberg

Bitcoin 200-Day EMA Rejection Follow-Up

Short
COINBASE:BTCUSD   Bitcoin / U.S. Dollar
The analysis I posted yesterday about a likely 200-Day EMA rejection played out nicely. While the pattern played out as predicted, the fundamental backdrop got worse significantly faster than expected. Because of this I decided to leave my stop-loss as is instead of adjust for each price level.

With how firm the resistance is holding up and the volume that we're selling I feel that closing my position at the 38,500 level (which would be the new stop-loss according to the first post) would be premature. I will break down my decision making process here:

Chart Description
  • Yellow flags indicate the position on each chart that the 200 day EMA was broken.
  • Hourly chart shows 4 clear rejections of 42,000 after breaking down and a potential bear flag .
  • Daily shows the sharp 200-day rejection as predicted yesterday as well as an approaching death cross.

Analysis
  • The first interesting move is a quadruple top after a support break. A key insight here is the volume bars during each rejection:

    1 - relatively low volume with a higher volume pump off the bottom of the channel. This is about the spot where I made the post yesterday.

    2 - high volume selloff which coincided with bearish news out of China.

    3 - low volume bleed and reversal

    4 - high volume selloff followed by potential bear flag . The reason I say potential here is because the green intervals have decently high volume compared to what I like to see for a clear flag. Although it seems to have dropped in the recent hours, this is still something I would like to confirm.

  • The second item I'm interested in is the approaching death cross on the daily chart . The red line indicates the 20-day EMA is getting dangerously close to the 200-day EMA that is the focus of this trade. This puts bulls in a position where the clock is ticking down and there is no momentum anywhere to indicate that it can break over the resistance and hold it. I do feel like there will be a battle though which is part of the reason I don't want to move my stop-loss prematurely.

With all this being said, I stuck to the plan for the profit taking and closed a small portion at target #1. I will be looking to re-enter at the top of the hourly channel and if we confirm a break below the channel.

Since this situation is fluid it is important to be unattached. Although I am not seeing much for bulls right now it is important to not ignore something if it does pop up. For this reason, price targets and stop-losses may be getting adjusted as needed. If the death cross occurs I will be lowering my price targets significantly.

As always, don't be blind to risks. There is still everything that was mentioned yesterday especially the unpredictability of news. If there is bullish advances re-analyze the trade and adjust as needed. Do not fall in love with a trade even if it looks solid in the moment.
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