holeyprofit

BTC bullish contingency plan

Long
BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
I have various (Linked) posts explaining reasons I think we might be a big a bull trap in BTC and be about to enter into a huge crash (And if we did, it would probably be the definitive crash in BTC to date - a lot more people can get hurt in this than anything previously, and it can be bigger ... and slower, slow is painful). I think the bull trap is a very credible risk. As a trader I am heavily short BTC 50,500 - 51,000 and comfortably selling up to 53,000 if further spikes come. As a human, I think it's worth taking some time and effort to explain these risks to people who've less time researching bear moves than I have.

My forecast of a bear market is contingent upon certain things happening. I'm not a "Right eventually". I'm typically right or wrong within hours, day or weeks. If it takes months, we're talking about something setting up on huge timeframes with the potential to be decade defining moves, and months is not that much relative to that. This is not a fully refined contingency plan at this point, some things will be easier to do if/when there's a bull breakout made - but this is a fairly good representation of the sort of action I'd expect to see showing me I am wrong and how my overarching bias on BTC would change and where I'd be interested in getting back in long.

My main thesis here is we have a lot of historic evidence for bull traps ending around the 76% retracement level. This was the case in the DJI crash of 1929 and it was the case of the BTC crash of 2017. With many other notable crashes in the middle. SPX 1987 and Nasdaq 2000 being two honourable mentions. Conversely, we have a stronger tendency for markets to continue to rally if they can break over these levels. There are some caveats to this, inside various models/theories of trend reversals double tops in the first retracement are obvious overshoots of the 76% retracement levels.

The price action when this happens tends to be fairly similar. In the event the market will continue to be a bull it will usually pull back sharply. Make some sort of double bottom / false bear breakout pattern and then enter into the higher highs/higher lows pattern of a trend. Typically we'll have see waves one and two in Elliot and be into a new wave 3, which will go on to break the previous high. When there's not a pullback, that can sometimes be more indicative of a double top . I tend to be a bit more wary of those. ETHUSD shows a good example of this. ETH moved higher than I'd like to take short entries but I am still waiting to see if that turns into a rejection or not.

In the event we do see a big run through my selling levels on BTC and then a pullback, I'll be looking for ways to use bullish trend following strategies to estimate where a low in the pullback would likely be (Retrace levels/previous resis) and then look to pick up tight stop loss buys there. These will be large RR trades and they will keep me net long as the market continues to make higher lows. This will also give me the option to try to short again into double top sort of patterns where I have hyper high risk:reward on the trade.

This is not a bullish forecast. It's just me explaining what I think would happen if my forecast move fails. Bulls have a fight to win before any of this would become active. I'll update if that happens.