Looking across trading groups it seems the majority of Furus are long Bitcoin here. It is like a herd of wildebeests have stumbled upon a pasture of green grass. Normally we do not like to be positioned with the majority of the market, but price action is pointing to solid order flow to the buy side and that is the "hoof" prints we look for.
Of course whenever the herd is overly bullish or bearish we want to take note. Emotional sentiment is currently bullish and this can result in a fake-out, flushing of longs and then a final swing higher. Not that it has to happen, but we want to be aware that it can.
Though Elliott Wave and Fibonacci are not magical indicators foretelling of the future, they do provide some relative perspective into market cycles and proportional levels of interest.
Markets do cycle and whether you are a EW purist or look more at it from Wyckoff's perspective, they both attempt to provide perspective as to the different market phases we are currently in based on previous swings and amplitudes there of.
In the end it is really about market sentiment and order flow. Is the herd headed North or South and how fast are they moving? Well currently the herd appears to be headed North, but again this can change quickly.
Order flow is favoring a swing higher in the near term. I say favoring as if I was a book maker in Vegas and putting the odds on the winner of March madness.
Taking out the 9000 level was an initial long signal that we recently took. We mentioned to watch for resistance around 9200 initially, which is where we expected sellers to step in from those trading shorter time frames. However, we are not seeing buyers step back in off the prior 9000 resistance now support level which is indicative of buy side momentum and order flow in the short term. We do not want to put much weight into this observation, as it is on a very small time frame or fractal cycle, but it does provide some evidence as to the interim strength of the market.
The next minor resistance level is at 9400, and a break of 9200 could see a swing blow right through this level and into the main resistance level of 9600. This is the first major level of resistance for Bitcoin. Is it based on Fibb? Not at all, but using Fibonacci as a proportional measure of the overall bearish swing, it does provide an additional perspective.
So far so good, the market is behaving in a manner that is conducive to our recent swing trade.
What we do not want to see is the market give back this swing by taking out the 9000 level in the next 48 hours. We like to see lingering at resistance as markets that do not have enough buy side order flow to move higher tend to fall apart quickly. More lingering implies buyers continue to step in even at the highs and once sell side order exhaust the next swing occurs. No magical indicators or crystal ball required. I see some of these charts and they look like an EEG. Talk about noisy charts!
Though it is still early, order flow is behaving so far as we would expect. Another inside candle on the daily, would be additional evidence that buyers continue to step in and would favor sellers are exhausting or there simply is not many at this level, creating an environment for a swing to 9600.
Now if we do take out the 9000 level in the near term, it is not an end all for a move back into the mid 10k area. The relevant area of support from a proportional stance is still between 8200-8800.
We could see a retest of this area and a bullish reversal off a retest would be a higher probability setup for a long where we would increase our % risk for this type of trade. Why not use the same % risk, or many might be asking what is the % risk to begin with? When we issue a trade it is always tagged with a % of capital we want to risk for a specific trade based on three MAIN factors, position, environment and structure. So how much capital would we risk for this trade?
Because we took an initial long signal based on a long setup in a favorable position, with little structure and an unfavorable "long" trading environment, we reduced our risk to 1% for this swing trade. Many with little experience in trading do not understand the concept of capital management. A long is a long and they make no adjustment to the risk they take on a trade regardless of environment, structure and position.
Here we have position, but we do not have a mature structure and the environment is still a little risky (still fighting sell side momentum). So three factors and if you give each one a 1% risk than your risk for this type of trade should be 1%. IF we had position, structure and a positive environment we would risk 3% on a trade. That happens seldom so most of our trades are 1-2%.
Of course these are only the main factors we look at, there are several others to take into account as well, but if you just use these three factors alone, you are way ahead of the herd.
IF we pulled back into the 8600 area and a long signal evolve, we would look to increase our risk. Now we would have favorable position and a more favorable structure so we would adjust our risk accordingly. Since we have nothing more than position we only want to risk 1% of our capital as it has a higher probability of being stopped out. Taking a 1% loss on our capital is not an account destroyer.
Those risking 10-20% of their capital because they do not take the time to calculate what their position size should be, and or just are simply market gamblers generally end up blowing out their account during a string of losses. We all have strings of losses, the ones that understand risk management are the ones that come out on the other side ok.
In short, minor support is found at 9000 which is a key level to hold for this trade. The 9200 level triggers a second long signal and we would expect a move to 9600 rather quickly. Taking out the 9000 level a retrace to the 8600 level would be an area to look for another long IF we get a bullish setup and we would increase our capital risk if this occurs.
Disclosure: Long Bitcoin from 9010 with a 1% risk as we sent out a few days ago.
Of course whenever the herd is overly bullish or bearish we want to take note. Emotional sentiment is currently bullish and this can result in a fake-out, flushing of longs and then a final swing higher. Not that it has to happen, but we want to be aware that it can.
Though Elliott Wave and Fibonacci are not magical indicators foretelling of the future, they do provide some relative perspective into market cycles and proportional levels of interest.
Markets do cycle and whether you are a EW purist or look more at it from Wyckoff's perspective, they both attempt to provide perspective as to the different market phases we are currently in based on previous swings and amplitudes there of.
In the end it is really about market sentiment and order flow. Is the herd headed North or South and how fast are they moving? Well currently the herd appears to be headed North, but again this can change quickly.
Order flow is favoring a swing higher in the near term. I say favoring as if I was a book maker in Vegas and putting the odds on the winner of March madness.
Taking out the 9000 level was an initial long signal that we recently took. We mentioned to watch for resistance around 9200 initially, which is where we expected sellers to step in from those trading shorter time frames. However, we are not seeing buyers step back in off the prior 9000 resistance now support level which is indicative of buy side momentum and order flow in the short term. We do not want to put much weight into this observation, as it is on a very small time frame or fractal cycle, but it does provide some evidence as to the interim strength of the market.
The next minor resistance level is at 9400, and a break of 9200 could see a swing blow right through this level and into the main resistance level of 9600. This is the first major level of resistance for Bitcoin. Is it based on Fibb? Not at all, but using Fibonacci as a proportional measure of the overall bearish swing, it does provide an additional perspective.
So far so good, the market is behaving in a manner that is conducive to our recent swing trade.
What we do not want to see is the market give back this swing by taking out the 9000 level in the next 48 hours. We like to see lingering at resistance as markets that do not have enough buy side order flow to move higher tend to fall apart quickly. More lingering implies buyers continue to step in even at the highs and once sell side order exhaust the next swing occurs. No magical indicators or crystal ball required. I see some of these charts and they look like an EEG. Talk about noisy charts!
Though it is still early, order flow is behaving so far as we would expect. Another inside candle on the daily, would be additional evidence that buyers continue to step in and would favor sellers are exhausting or there simply is not many at this level, creating an environment for a swing to 9600.
Now if we do take out the 9000 level in the near term, it is not an end all for a move back into the mid 10k area. The relevant area of support from a proportional stance is still between 8200-8800.
We could see a retest of this area and a bullish reversal off a retest would be a higher probability setup for a long where we would increase our % risk for this type of trade. Why not use the same % risk, or many might be asking what is the % risk to begin with? When we issue a trade it is always tagged with a % of capital we want to risk for a specific trade based on three MAIN factors, position, environment and structure. So how much capital would we risk for this trade?
Because we took an initial long signal based on a long setup in a favorable position, with little structure and an unfavorable "long" trading environment, we reduced our risk to 1% for this swing trade. Many with little experience in trading do not understand the concept of capital management. A long is a long and they make no adjustment to the risk they take on a trade regardless of environment, structure and position.
Here we have position, but we do not have a mature structure and the environment is still a little risky (still fighting sell side momentum). So three factors and if you give each one a 1% risk than your risk for this type of trade should be 1%. IF we had position, structure and a positive environment we would risk 3% on a trade. That happens seldom so most of our trades are 1-2%.
Of course these are only the main factors we look at, there are several others to take into account as well, but if you just use these three factors alone, you are way ahead of the herd.
IF we pulled back into the 8600 area and a long signal evolve, we would look to increase our risk. Now we would have favorable position and a more favorable structure so we would adjust our risk accordingly. Since we have nothing more than position we only want to risk 1% of our capital as it has a higher probability of being stopped out. Taking a 1% loss on our capital is not an account destroyer.
Those risking 10-20% of their capital because they do not take the time to calculate what their position size should be, and or just are simply market gamblers generally end up blowing out their account during a string of losses. We all have strings of losses, the ones that understand risk management are the ones that come out on the other side ok.
In short, minor support is found at 9000 which is a key level to hold for this trade. The 9200 level triggers a second long signal and we would expect a move to 9600 rather quickly. Taking out the 9000 level a retrace to the 8600 level would be an area to look for another long IF we get a bullish setup and we would increase our capital risk if this occurs.
Disclosure: Long Bitcoin from 9010 with a 1% risk as we sent out a few days ago.
Comment:
And that my friends is what we call a fake-out. Long setup triggers, market makers step in and push the market through stops, which are probably known, and set limit orders at lower levels to buy back the sell. Watch the 8600-8800 level for support.
