The recent Bitcoin spike down below 10k was somehow fueled by FUD (Fear, Uncertainty, Doubt). These fast moves may be triggered by news items or one whale selling or all combined, who knows?
They are not predictable, the downtrend before this event on the other hand did provide some trade entries if you read the price action right!
So lets look at this downtrend and the key short entry points along the way:
Entry 1: The first entry is of course more agressive, because there is no established downtrend yet. But there was a bulltrap, when prices first broke above 11600 and then turned down back into the former range to 11500. When the market failed twice to go higher again (above 10600) then you could enter below the marked bar (red arrow).
Entry 2: We now had a leg down and then a sideways movement. It is not easy to enter in such a small range, but there were several reasons to look for a short.
Notice that we had reached the possible downtrend line by moving sideways.
You are are also looking for a second leg down at this point. At least you expect a retest of the supports at the lower side of the small range at 11200.
Entry 3: After entry 2 we saw a second steep leg down (blue). This again led to consolidation in a tight range.
What can you expect in a little range? Right, traps to one or even both sides! Here we had first a little trap to the downside when braking below 10880.
Why is this a trap, when you are shorting a bearish breakout in an clear downtrend?
Look at the location, the breakout occurs right into the lower downtrend channel line. This is not a key entry point!
So the market then goes up and breaks out to the other side. Now some traders go long, entering counter trend to the still intact channel.
But then the real trap happens when prices move back into the range and a attempt to go higher fails (signal bar).
Notice that we have now reached a key entry point, because we have room to go down inside the channel again to 10600!
By moving sideways prices are near the EMA and the upper channel line again.
Entry 4 + 5: After another leg down which happened after trade 3 prices were moving sideways again, you starting to see a pattern here? ;)
Of course now we had two blue legs down and then another red leg, so traders may start to think long..."maybe this is the bottom"? Some wait for a nice double bottom and the break above resistance (10880). Prices even broke the downtrend line, so now it is surely safe to go long and declare the downtrend over? Not so fast!
Price action traders still look for entering short, because after the first break of the trendline you can expect another one or two legs to a new low.
And this is exactly what happend here. The new low at 10.400 was the target from an equal length second red leg down.
Conclusion:
1. Enter at key entry points: Near the upper downtrend channel line and/or the EMA.
2. If the downtrend line is broken still look for a new low or a retest of the low. After two legs to a new low, chances for a range or reversal are much better.
They are not predictable, the downtrend before this event on the other hand did provide some trade entries if you read the price action right!
So lets look at this downtrend and the key short entry points along the way:
Entry 1: The first entry is of course more agressive, because there is no established downtrend yet. But there was a bulltrap, when prices first broke above 11600 and then turned down back into the former range to 11500. When the market failed twice to go higher again (above 10600) then you could enter below the marked bar (red arrow).
Entry 2: We now had a leg down and then a sideways movement. It is not easy to enter in such a small range, but there were several reasons to look for a short.
Notice that we had reached the possible downtrend line by moving sideways.
You are are also looking for a second leg down at this point. At least you expect a retest of the supports at the lower side of the small range at 11200.
Entry 3: After entry 2 we saw a second steep leg down (blue). This again led to consolidation in a tight range.
What can you expect in a little range? Right, traps to one or even both sides! Here we had first a little trap to the downside when braking below 10880.
Why is this a trap, when you are shorting a bearish breakout in an clear downtrend?
Look at the location, the breakout occurs right into the lower downtrend channel line. This is not a key entry point!
So the market then goes up and breaks out to the other side. Now some traders go long, entering counter trend to the still intact channel.
But then the real trap happens when prices move back into the range and a attempt to go higher fails (signal bar).
Notice that we have now reached a key entry point, because we have room to go down inside the channel again to 10600!
By moving sideways prices are near the EMA and the upper channel line again.
Entry 4 + 5: After another leg down which happened after trade 3 prices were moving sideways again, you starting to see a pattern here? ;)
Of course now we had two blue legs down and then another red leg, so traders may start to think long..."maybe this is the bottom"? Some wait for a nice double bottom and the break above resistance (10880). Prices even broke the downtrend line, so now it is surely safe to go long and declare the downtrend over? Not so fast!
Price action traders still look for entering short, because after the first break of the trendline you can expect another one or two legs to a new low.
And this is exactly what happend here. The new low at 10.400 was the target from an equal length second red leg down.
Conclusion:
1. Enter at key entry points: Near the upper downtrend channel line and/or the EMA.
2. If the downtrend line is broken still look for a new low or a retest of the low. After two legs to a new low, chances for a range or reversal are much better.
More key entry points: