Bitcoin's dead cat bounce off the key 4hr 38.2 Fib tag (582.37) has played itself out. If that low does indeed prove to be 'the low' that will bode well for going forward ( reversals off 38.2 tags are indicative of a strong market). Additionally, higher time frame analysis suggested we needed to work through a correction-time-window that ought to take us into this week and that has played out as anticipated. The question now is, do we break out of the current trading range in a massive rally or take one more tank lower into higher time frame OTE zones? The answer to that is still elusive at the moment but considering the Silk Road auction is looming it shouldn't surprise anyone to see breakout attempts fail ahead of that event.
So looking at the chart this morning (7AM pst) it was not surprising to see a short setup has developed over the past couple of days. Indeed, the counter trend rally off the 38.2 Fib has set up a very interesting price pattern. I Tweeted last night that a fail at that level may set up a juicy short and now I see a has developed off that exact level. As confirmation of the idea, Willy himself is still quite ill and in the process of cleaning himself up and our raw momentum reading ( histogram) has registered a at these levels too. While flow is still positive, I do see our latest big bar was red and OBV itself is teetering. Put it all together and it looks like we may need to test the lower end of our recent trading range before any move higher can begin in earnest.
So that brings us to the trade. I like the idea of shorting on fail of the last candle bar's low 602.34 with stops at new highs (just above 619.60) and a target of both the OTE (Long) sweet spot 550.90 and the very noticeable gaps down to 553,23. This represents a little more than 3:1 potential reward to risk and a ratio I like. While there are no guarantees with setups (and my CME buddies are more than content with 60% long term accuracy) this feels like a setup worth taking. Sadly, due to lack of funds, my account is unable to take the trade; but I sincerely hope those out there that can take the risk ought to seriously give this setup some consideration - or at least learn from it.
Cheers all and hope it helps
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OBV: is a volume indicator I use (On Balance Volume) and here a tutorial I wrote on using volume indicators: https://docs.google.com/presentation/d/1zyvKRo0nVXAHHSTKS9qKilgJVTwnC04i8p1uwqx-qG4/edit?usp=sharing and here is a YouTube video I did on the tutorial info: https://www.youtube.com/watch?v=0f9tXq7Gdo8&index=4&list=PLBQfICzKWV2K2MQOgeX9ssk69W1mgnxuW