Pattern recognition is a key behavior when it comes to using effectively (not relying on oscillators). This is the case because chart patterns serve as a gauge for crowd sentiment in terms of order flow. Chart patterns alone can be random at times, BUT when they develop within an isolated context, they can be invaluable when it comes to anticipating how the herd will react next.
Descending are one of those uncommon patterns that signal the exhaustion of a trend. And the one on this chart (along with most of the alt coins) is of a large degree (took weeks to develop) and completed near a major . Now that an initial rally has materialized, our focus is to look for the development of a broader support structure over the next few weeks.
The larger degree structure that we would like to see before considering accumulating more inventory would be a higher low. Along with that, the 3600 and 4500 resistance levels would have to be decisively taken out. Until this scenario develops, we will continue to maintain a strong defense.
Often we get the question: If you think its going higher, why wait for 4500 before buying? The answer is: risk. If we had NO inventory, then we could justify some buying at such attractively low levels. Having rules to control risk is more important than "buying the bottom" and has saved us a ton of money as this market may new low after new low.
We are open to taking smaller time frame trades such as aggressive swing or even day trades to capitalize on an initial recovery. Since the exposure is much more limited, these activities fit within our defensive framework. The key to coming out ahead is tight position management and taking profits while they are available. It sounds like common sense until your greed enters the picture.
The current formation may lead to such a trade signal (break above 3600).
In summary, Bitcoin is finally showing significant signs of building a recovery. It still needs to prove itself, but at least the current formations provide a context to measure against. Remember tops and bottoms are a process and develop over time.
Can this market continue lower? Sure, anything can happen and that is why we ALWAYS maintain a flexible mindset. This is what helped us preserve our capital, especially after the 6K support break.
Amateurs struggle with being "right" while professionals adjust to probabilities. And based on the current structure, the bias is shifting from to neutral. This does not guarantee a recovery, but if a recovery is going to unfold over the next few weeks, there is a greater chance that this is the beginning. You don't have to be right, you have to be flexible. Let the market provide the proof.