With recent bullish price action, I thought it might be a good idea to show you have I evaluate an asset in terms of "turning" from bearish to bullish long term.
I use several steps. Each has meaning and if we complete them, I would have a high degree of confidence we are moving bullish. That doesn't mean 100% as I've seen swings fail, but I'd say 80-90% likely to run bullish if bitcoin follows through.
As a cycle trader, I am counting weekly cycles so I can look for weekly bottoms that occur about twice a year. The major weekly cycle will end up marking the bear market low. It is feasible that the December low could be the bottom. If I had to guess, I'd say no, but its close enough and in a cycle timing band to be feasible. Here is what I'm looking for:
Step 1 - The very first thing that gets me to a neutral point is a weekly swing low. This is where the weekly chart moves up, pulls back and makes a higher high. This doesn't guarantee bullish, but makes be on guard and careful about how I short.
Step 2 - That 200MA is a magnet and needs retested on the daily. I think this latest bullish move has a chance to go all the way to $5k area. It might not, but I'd go so far as to say its a common place for price to rally
Step 3 - Close a weekly above that 200 MA and if it tests the weekly swing, that is even better. If it retests the 200 MA after closing, again that is glorious and should give you a buy opportunity.
Step 4 - Clear that $6k barrier. It will be tough resistance but once we get through it and close above, I would be 100% bullish and fully switched to bullish move, meaning I would hold longs much longer, sometimes through full daily cycles.
How Do You Trade this?
It's just not easy. Nothing is harder to trade for a swing trader than a major bear or bull market flip. You are in no mans land. You don't know if its a bull or bear. You have to be cautious with both longs and shorts. In some cases, its better to not even trade it or at least keep it light.
I try to pay attention to daily cycles. If we start making bull runs that last longer than 30-35 days, that is also a very bullish sign. So if we were at $5000 around day 40, I'd be more inclined to look to long. If we jolted up to $5K, got rejected by day 30, then I'd likely be short and watch the $4200 area closely. Close back under the swing low and I'm holding more short for new lows.
During these potential flips I'm careful and take profits a bit early, but what I really want at this stage is to have a long from near the lows. I have one at $3400 now, so I'd love to see this cycle go crazy bullish and last 40 days then recapture the 200. But usually the market doesn't give me what I want. I would be happy to in a full long term position anywhere under $6500. I think we will go to $100k+ so anything $3k-$7k is sweet.
And remember... it doesn't have to do all these retests. It's what I look for but if we had a move up to $5500 sideways to $5200 then back over $6000. I would still be bullish even without tests. Its just more common to see SR tests.
I use several steps. Each has meaning and if we complete them, I would have a high degree of confidence we are moving bullish. That doesn't mean 100% as I've seen swings fail, but I'd say 80-90% likely to run bullish if bitcoin follows through.
As a cycle trader, I am counting weekly cycles so I can look for weekly bottoms that occur about twice a year. The major weekly cycle will end up marking the bear market low. It is feasible that the December low could be the bottom. If I had to guess, I'd say no, but its close enough and in a cycle timing band to be feasible. Here is what I'm looking for:
Step 1 - The very first thing that gets me to a neutral point is a weekly swing low. This is where the weekly chart moves up, pulls back and makes a higher high. This doesn't guarantee bullish, but makes be on guard and careful about how I short.
Step 2 - That 200MA is a magnet and needs retested on the daily. I think this latest bullish move has a chance to go all the way to $5k area. It might not, but I'd go so far as to say its a common place for price to rally
Step 3 - Close a weekly above that 200 MA and if it tests the weekly swing, that is even better. If it retests the 200 MA after closing, again that is glorious and should give you a buy opportunity.
Step 4 - Clear that $6k barrier. It will be tough resistance but once we get through it and close above, I would be 100% bullish and fully switched to bullish move, meaning I would hold longs much longer, sometimes through full daily cycles.
How Do You Trade this?
It's just not easy. Nothing is harder to trade for a swing trader than a major bear or bull market flip. You are in no mans land. You don't know if its a bull or bear. You have to be cautious with both longs and shorts. In some cases, its better to not even trade it or at least keep it light.
I try to pay attention to daily cycles. If we start making bull runs that last longer than 30-35 days, that is also a very bullish sign. So if we were at $5000 around day 40, I'd be more inclined to look to long. If we jolted up to $5K, got rejected by day 30, then I'd likely be short and watch the $4200 area closely. Close back under the swing low and I'm holding more short for new lows.
During these potential flips I'm careful and take profits a bit early, but what I really want at this stage is to have a long from near the lows. I have one at $3400 now, so I'd love to see this cycle go crazy bullish and last 40 days then recapture the 200. But usually the market doesn't give me what I want. I would be happy to in a full long term position anywhere under $6500. I think we will go to $100k+ so anything $3k-$7k is sweet.
And remember... it doesn't have to do all these retests. It's what I look for but if we had a move up to $5500 sideways to $5200 then back over $6000. I would still be bullish even without tests. Its just more common to see SR tests.
Comment:
This is what I tweeted on Feb 24th.
"Be careful this week trading crypto. There is a VERY good chance we go into another choppy range. PLEASE do not put stops close to LTF structures. They are likely coming after you. They will paint breakouts and then dump on your ass.They will paint breakdowns and buy it up."
This is exactly what is happening. I was in a short and closed it this morning for a very small profit. I'm out of my LTC short as well. Totally flat and waiting for us to hit $3900 area or close under the range.
This is what I tweeted on Feb 24th.
"Be careful this week trading crypto. There is a VERY good chance we go into another choppy range. PLEASE do not put stops close to LTF structures. They are likely coming after you. They will paint breakouts and then dump on your ass.They will paint breakdowns and buy it up."
This is exactly what is happening. I was in a short and closed it this morning for a very small profit. I'm out of my LTC short as well. Totally flat and waiting for us to hit $3900 area or close under the range.
Comment:
You can make bullish and bearish cases. Bitcoin is just in the middle doing nothing. ETH looks sick. LTC now looks strong.
One thing I'm sure will happen is more tricks and games from big money players. I would expect spikes and wicks to form this week. So here is what to look for.
If we get a move above or below the orange range markers then you want to see hourly closes above them and no long spikely candles. You want to see the range marker turn into support or resistance. That would tell you that we are likely to hang out above or below the range for awhile.
Otherwise, a big aggressive move above or below the range is very likely just a setup to chase liquidity. So watch for the move to reverse fast. Moves below the range that get back into the range are areas you can consider taking a trade.
This is not going to be easy to trade.
You can make bullish and bearish cases. Bitcoin is just in the middle doing nothing. ETH looks sick. LTC now looks strong.
One thing I'm sure will happen is more tricks and games from big money players. I would expect spikes and wicks to form this week. So here is what to look for.
If we get a move above or below the orange range markers then you want to see hourly closes above them and no long spikely candles. You want to see the range marker turn into support or resistance. That would tell you that we are likely to hang out above or below the range for awhile.
Otherwise, a big aggressive move above or below the range is very likely just a setup to chase liquidity. So watch for the move to reverse fast. Moves below the range that get back into the range are areas you can consider taking a trade.
This is not going to be easy to trade.
Comment:
So rather than slowly working our way, we ranged and then exploded. We are now trying to complete Step 1 and Step 2.
The break out squeezed shorts all the way to $5200. We are now above the $4600 area and the 200 MA. It would be ideal to stay above this area. I also like that we formed a strong, right translated cycle. Here is what I want to see now.
1. Weekly close up above $4600 to give us a weekly swing and the first confirmation of a weekly above the 200 MA
2. We've had a move up so it needs to consolidate then form a pullback. I'd like to see this trade over $5000 for awhile then work its way down and test the 200 MA as support and hold.
If we get that in a few weeks, I will be neutral to bullish and at least expect a move to test $6000. That will likely be a battle that won't be easy to get past.
So rather than slowly working our way, we ranged and then exploded. We are now trying to complete Step 1 and Step 2.
The break out squeezed shorts all the way to $5200. We are now above the $4600 area and the 200 MA. It would be ideal to stay above this area. I also like that we formed a strong, right translated cycle. Here is what I want to see now.
1. Weekly close up above $4600 to give us a weekly swing and the first confirmation of a weekly above the 200 MA
2. We've had a move up so it needs to consolidate then form a pullback. I'd like to see this trade over $5000 for awhile then work its way down and test the 200 MA as support and hold.
If we get that in a few weeks, I will be neutral to bullish and at least expect a move to test $6000. That will likely be a battle that won't be easy to get past.
As I said, probably not. I think we are going to $4200-$5000 then will drop before day 30 and move down into late March, potentially to new lows that could marke the bottom and put us around a week 32 mark which is more common weekly cycle. But I'm open to anything and as I said, sitting on $3400 longs you can bet I'm hoping we flip bullish. I'm tired of trading bear markets.