As we mentioned previously the 9340 level was a significant support / resistance level for bitcoin, where we often see a battle between the bulls and the bears. Clearly the bulls lost as the bears were able to push back through the support level, triggering trade stops, leading to the subsequent selloff. This resulted in the second “fake-out” as the rug was simply pulled out from under the bulls. This is why we emphasize trading at levels near major resistance areas are “aggressive” higher risk trades and you should position accordingly.
Technical: There is a clear defined five wave cycle now, and the chart has been adjusted accordingly. We mentioned in the previous post that this was “likely a corrective sequence” and “likely” has turned to “is”. Though there was a wave count that took us to 11k before a broader correction, this is now negated as mentioned in the previous article.
Chart levels have been updated slightly as the pullback provided a clearer picture of the overall wave structure. BTC' fell through the initial support zone, but often (C) legs pullback to within wave (iv) which overlaps with the 0.50 and 0.618 retrace of wave (1) between 7809 and 8183. This provides the best opportunity for a trade setup and reversal.
I added two additional indicators to the chart with the 50 DMA and the 14 day RSI. Though many traders use these as signals, they lag the market, only providing insight into the past and not the future. Trading these types of “past looking” indicators alone can result in portfolio erosion as many found out trading the “death cross”.
The RSI broke 50 and has now settled into the 40 support level as bullish markets often trade out of the 35-40 area. More aggressive traders can look for short term trades from the 50, but these are higher risk areas to trade from.
The 50 DMA may provide initial support since this is a common level for traders to focus on. It is never a bad idea to see what the market is looking at – hence adding it to the chart. Clearly the 200 DMA was a resistance level where traders sold, so we can not just ignore these types of indicators, but trading them alone can lead to losses. They provide more weight when they overlap with a significant support or resistance level for which the 200 DMA did at both the 9696 and 9970 levels.
Summary: Though there was the potential for the market to move higher before a broader correction. This simply did not happen. Thursday confirmed Bitcoin was already in a broader correction cycle. We have adjusted our charts accordingly as we adapt to the current market conditions.
i know i have suffered as bitcoin takes large bounces in past years cycles -- yet the new money pushes the alts up after
@ i just don't think it is smart for me to switch most of my alt positions over to btc --- usually i would -- but after such crazy and huge losses ! (im used to it trading for many years -- but got lazy n learned a huge lesson from past -- ALWAYS PAY CLOSE ATTENTION TO THE STOP LOSS TEK U USING DURING CERTAIN TIMES ) this one i will not forget EVER lol
good luck to u my friend !
AhemPrema
⋅
@invisiblefriend, you and me both my friend. This correction was a valuable learning experience for me.....stop losses and increase those as the price goes up!!
goldbug1
⋅
@barclayjames, @ALTER.daemon @invisiblefriend Your seeing Nasdaq, Goldman, the NYSE and several others looking to open exchanges. Once this happens, ETF's options etc and this will bring a ton of fresh money into the space. It is only time! Then its liftoff and mainstream!!
cryptotrader123
⋅
@goldbug1, Hello Sir and thank you for the analysis. You did mention ETF's and if they are cash settled, wouldn't that divert the money flow from crytpto exchanges into Nasdaq, Goldman and NYSE? If you do not need to own BTC, you have no use of Binance or Bittrex to acquire BTC, for instance. Perhaps, they will have ETF's settled in BTC and that would be a game changer. I would like to hear your opinion on the matter. Thank you in advance.
goldbug1
⋅
@cryptotrader123, ETF's are not cash settled, it is like holding a basket of stocks. They take money from several investors and as a whole purchase the underlying assets. Futures can be deliverable or cash settled. Options are similar in you can exercise an option, cash settle, or let them expire. Keep in mind taking delivery on a futures contract is not easy. You have to make this statement prior to taking delivery. You can not at expiration say, deliver me the goods, the Hunt's brothers changed how futures were traded.
ETF's will bring more cash into the market as they make it available to a wider group of investors traders. This will result in options, shorting the market etc. In the long term we will not see the price swings we currently see as the market will be much more liquid.