I have a long position in bitcoin and will continue holding it for now. We are building a consolidation range above $22k and I favor trend continuation.
However, its important to understand where things can go wrong. And after explaining its OK to buy at high prices, I also need to explain how to manage risk.
At this point, I really do not want to see us close a daily candle under that $22300 mark. If we fall below that and get bought back up, that is fine. But if we fall under this range and start trading down, we are likely to see a move back to $20k.
If that happens, we really need to see strong buying at $20k. A quick wick that gets bought back up would be OK. I know people love to buy a breakout retest but bitcoin usually will runaway from a breakout for much longer and go much higher than 20%. Last clean ATH break we went up 150% for 7 weeks. I really want to see $28k or higher over 4-6 weeks before a more meaningful pullback.
For example, a move to $30k over 3-6 weeks then a 30% retrace to $20k a few weeks later would make a wonderful time and place to buy a breakout.
If we go down to $20k this week, I will lighten up positions and if we get a weak bounce, I will cut my long and look for lower prices as we would risk a failed breakout.
Gold is a good example of how you can get a failed breakout after new all time highs. Why does this happen?
As soon as you break all time highs, you will get a lot of buyers come in. But if the trend doesn't continue, those buyers have weak hands. If it goes down to the breakout and big buyers don't step in, people get nervous and sell. You risk a much deeper retrace. There isn't much support below $20k, which opens up $12k-$14k.
Gold fell back down and tried to bounce at the breakout for a few weeks but ultimately ran out of buyers and it dropped to lower support.
Bitcoin tends to move faster and will move much further if the breakout doesn't hold.
Again, I expect us to go higher in coming weeks, but I'm ready to react if fall back. Holidays have thin trading and I think the crypto market might still be a little spooked from the XRP news and that can cause crazy things to happen. Hope this helps and Merry Christmas to you all!
However, its important to understand where things can go wrong. And after explaining its OK to buy at high prices, I also need to explain how to manage risk.
At this point, I really do not want to see us close a daily candle under that $22300 mark. If we fall below that and get bought back up, that is fine. But if we fall under this range and start trading down, we are likely to see a move back to $20k.
If that happens, we really need to see strong buying at $20k. A quick wick that gets bought back up would be OK. I know people love to buy a breakout retest but bitcoin usually will runaway from a breakout for much longer and go much higher than 20%. Last clean ATH break we went up 150% for 7 weeks. I really want to see $28k or higher over 4-6 weeks before a more meaningful pullback.
For example, a move to $30k over 3-6 weeks then a 30% retrace to $20k a few weeks later would make a wonderful time and place to buy a breakout.
If we go down to $20k this week, I will lighten up positions and if we get a weak bounce, I will cut my long and look for lower prices as we would risk a failed breakout.
Gold is a good example of how you can get a failed breakout after new all time highs. Why does this happen?
As soon as you break all time highs, you will get a lot of buyers come in. But if the trend doesn't continue, those buyers have weak hands. If it goes down to the breakout and big buyers don't step in, people get nervous and sell. You risk a much deeper retrace. There isn't much support below $20k, which opens up $12k-$14k.
Gold fell back down and tried to bounce at the breakout for a few weeks but ultimately ran out of buyers and it dropped to lower support.
Bitcoin tends to move faster and will move much further if the breakout doesn't hold.
Again, I expect us to go higher in coming weeks, but I'm ready to react if fall back. Holidays have thin trading and I think the crypto market might still be a little spooked from the XRP news and that can cause crazy things to happen. Hope this helps and Merry Christmas to you all!
