Bitcoin: If 26.5K Low Breaks?

Bitcoin has chosen the scenario that I outlined in my previous analysis. The evaluation was based on the 28.5K resistance area that has yet to be compromised. IF momentum stays intact over the coming week, a test of the 25K support area is within reason.

On that note, there are two inside candles in place with an established low of 26,500. A break of this low will confirm a momentum continuation sell signal on the daily time frame. Keep in mind whether the signal follows through or not is a function of the catalyst. IF there is no significant catalyst such as a news event, etc, then a fake out can just as easily unfold. As I remind my followers regularly, MARKETS are HIGHLY RANDOM and you need to be prepared for numerous scenarios.

How you decide to trade such a signal is going to depend on your style and SYSTEM. In this game, you don't win by forecasting, you win by managing and adjusting to new information. For example, if you prefer to day trade then you should have specific rules in place that the smaller time frame price action must meet in order to justify the risk. The rules should also determine your specific risk and profit expectation. These rules define a specific strategy which should NOT change. If you are more advanced you can employ multiple strategies in order to capitalize on a variety of market scenarios. If this is confusing, then just start with one system, one set of rules.

What is the point of analysis then? Technical analysis provides CONTEXT. If you know how to EFFECTIVELY value information on a chart, you can narrow your focus within a small number of scenarios. From there you can weight which scenario is more likely to unfold based on elements like price structure, levels, patterns, etc. This type of information can help you shape your decision making process and better prepare you for what the MARKET will choose, not what you THINK it will choose.

To put this into perspective with Bitcoin, if the context implies a move lower is likely, you can now decide to AVOID long setups from your system. OR you can expect less from longs, recognize they are higher risk, and more from shorts. Also IF you get short as a result of your system rules and a conflicting signal appears (like a bullish engulfing candle) you should be able to exit the trade with little hesitation. Context tells you that such conflicting signals should NOT appear if the bearish momentum is truly in play.

Inexperienced traders often focus on the system components (and gimmicks), while completely missing the context. Ideally by utilizing both aspects, you can effectively minimize emotions from the equation and make decisions based on ACTIONABLE market information.

Thank you for considering my analysis and perspective.