Like I wrote in my previous report, do not react, instead plan ahead. The current location is a very attractive area for buyers. In fact, if you were watching the order books on the some of the major exchanges while price was flirting with the low 7Ks, there was a huge discrepancy between the pending buy orders and sell orders. There were was something like 30K to buy and 8K to sell at one point while short interest was declining. This was visible as price was going lower which clearly signaled that the smart shorts were getting out while the weak longs were being scared out. No new shorts were entering the market. This was a clear sign that a short squeeze was imminent.
Buying in such a situation is tough, especially if you are managing a larger position already. Do not fear though, because if this is the beginning of the next broader move, there is still plenty of opportunity to participate at an attractive reward to risk ratio.
The key to continuation is how the next few candles unfold. The fact that 8300 was taken out quickly is a sign of strength, and that could have been used as an aggressive buy trigger. The problem is, price is hesitating when it should be pushing higher. This hesitation may lead to a retest of the 7401 reversal zone boundary or even 6941 with is the next reversal zone established by the 7239 low. It is also possible that the market presents a shallow higher low. All three of these scenarios offer buying opportunities IF new reversal candles or inside bars appear at these levels.
In summary, the bigger picture carries the most weight. It also allows you to plan ahead when you are able to project relevant levels. These locations give you a reference point to anticipate, and prepare for reversal patterns and triggers, not to blindly jump in. Just like the market highs are very risky for longs, these market lows are very risky for shorts and attractive for longs, especially for position and swing trade longs since the potential move off of this area can lead to the mid 9Ks with relative ease. The question you must ask of yourself is how much can you risk? Choose an amount, and then split it up into smaller units. This allows you to distribute your risk across levels of aggressiveness. You can allocate part of your target size toward aggressive entries (break outs), while allocating other portions to more conservative entries (pin bars off of reversal zones). Remember this is not a casino, manage risk and the rewards will take care of themselves.
Comments and questions welcome.
If you type USDBTC into the search bar on trading view USDBTC SHORTS and USDBTC LONGS should appear as an option. I keep those charts in my watch list. If you go through the charts and relate the changes in volume on the shorts to price action on the USDBTC price chart you can see how price action effects the volume of short positions open. It's not a solid stand alone indicator but another indicator to be used in conjunction with a group of indicators.
Thank you for beautiful analysis! Can you please explain what do you mean here "This was visible as price was going lower which clearly signaled that the smart shorts were getting out while the weak longs were being scared out. No new shorts were entering the market. This was a clear sign that a short squeeze was imminent." Especially the phrase about "short squeeze", not very clear.
I want to make it clear that I have NO association with Nial, I don’t know him personally at all, and I don’t work for him, but I have found his various free online “newsletters” extremely helpful, clear, and well-illustrated. Perhaps you will also.
All the best in your ongoing learning process.
All the best to you and your trades as well! Thanks again!