Bitcoin: Another Fake Out Or The Rally To 20K?

Bitcoin is nearing our second target that we shared as part of our alternate swing trade idea almost a week ago. Why are we not calling for 20K or some other unrealistic target? Again it has everything to do with the proportions of the recent price structure. The goal of this analysis is to provide a sense of perspective and context as they relate to short term timing strategies like swing trades.

Why Not 20K?

It begins with Elliott Wave. That is the foundation that provides a broad road map that helps to define locations and probabilities of how the market is LIKELY to react, NOT definitely react. Those who knock this framework do not recognize its value because they are too focused on precise outcomes. It is usually dismissed as too subjective, since there are so many different interpretations of the same situation. The key to Elliott Wave is to use it in a general sense, NOT in a super detailed complex way.

We used it in a general sense when we were able to OBJECTIVELY identify a broader 5 Wave impulse structure (which peaked at 14K). That structure represents a large degree Wave 1. After Wave 1, naturally comes Wave 2. Wave 2's are CORRECTIVE. Knowing this tipped us off AFTER the 14K peak was confirmed, that the following price activity was going to most LIKELY be range bound, noisy, and full of fake outs. We anticipated this type of price action for weeks.

How Did This Help Us?

Since we had REALISTIC expectations of how Wave 2 is likely to play out, we were able to measure support levels that were relevant and HIGH probability for BULLISH reversal activity. So while the "gurus" are calling for shorts at 9750, we know better to look for longs. Elliott Wave provides the starting point, and then we refine it to get a better sense of probabilities and what to expect.

The 9750 support is NOT precise. Anyone looking for precision in this game are in the wrong game. Price went below 9200 before exhausting itself BUT what kept us short term bullish was the fact that buyers came in relatively quickly. Just look at the candles in the area. The most recent was a bullish pin bar which completed a double bottom formation. Nothing can be any clearer than that (amusingly I was criticized for not knowing how double bottoms work).

Don't Focus On The Reward Alone.

We are more aligned with the market through its own proportions. That is where REALISTIC targets come from relative to the time frame you are operating within. For this reason, we chose 10,535 and 11,080. They are well below the next relevant resistance zone that begins around 11,608. Does that mean Bitcoin will stop and reverse lower at these levels? WE HAVE NO IDEA.

In fact, since the broader structure is bullish, there is a good chance price can attempt to push back into the 12Ks. We are more concerned with our reward/risk rather than reward alone. If we are wrong, and Bitcoin goes higher, we have still exited with a profit while having no more exposure to risk. How many times have people had an opportunity to take profits while they are available, only to watch the trade give everything back plus more? These are short term swing trades, NOT investments. Our track record is a reflection of this important best practice.

The key to giving a trade a chance to exhibit a larger scale break out and run to 20K relates to the probabilities of the wave structure. At the moment, structural evidence suggests we are still in a Wave 2 which remember is corrective. Fake outs and noise are still to be EXPECTED.

We will NOT know that Wave 3 is in effect UNTIL AFTER THE FACT. The price structure has to prove itself. Evidence will come in the form of a major resistance level being compromised and right now that level is the 14K swing high. When that break out occurs, probability will be in favor of a run to 20K in a matter of a weeks. Until that happens, we operate with the expectations of a range bound market.

In summary, ORIGINAL perspective and context are of prime importance when formulating your own strategy. These elements are best shaped by information that comes directly from the market itself, NOT from any "expert" interpretations or opinions, ESPECIALLY if they are available for FREE. I have a responsibility that prevents me from sharing precise timing details, so instead I try to point to ways that will provide quality information for much more informed decision making. If you are going to criticize, then at least provide clear solutions and examples for the community to LEARN from.