BTC - Cash Is King in Market Corrections!

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
Many new to trading often overlook Market Conditions when trading and investing and focus on their favorite stock or in this case coin! Many that have been trading markets for years tend to do this as well. But having gone through many market corrections, 1987, 2000, 2008 to name the majors, there were clear signs to get your trading money to the sidelines and be PATIENT! I was not the only one to mention this @MarcPmarkets mentioned this as well several times and why I really recommend following him if you do not! Knowing when to get to the sidelines is extremely important. This only comes with years of market experience period regardless of how long you have been trading. Many of you are closing positions or waking up to positions in the red. This goes back to one of my posts where a 25% loss requires a 33% profit or 50% loss requires a 100% profit to get back to even. This is why I emphasize money management so often and not only in a trade, but when not to trade and be in cash! The same impulse that has many buying at the top of the markets is the same impulse that has them trading in volatile markets. OHHHHH I CAN'T MISS THIS TRADE. The best Investors / Traders ever like Paul Tudor Jones, Warren Buffet, know when a market is overheated and go to cash! You think Warren missed out in 2008 when when he had the cash to scoop up BAC' for $6 with a 6% preferred dividend per share? Or Paul Tudor Jones when he predicted the 87 crash while others were still piling in telling him he was missing out? That made him a legend and a rich one!

Last night I was watching this chart and was going to post it, but hesitated as it was too early and was going to bed. (I did post it in response to @lapoochi's question pertaining to what indicators I use, on the French Fries and Gravy post for those that wish to verify) so this is not hindsight by any means. I noticed 2 things that clearly stood out. $5600 which had been a solid support line, all of a sudden was turned to resistance. Also the RSI indicator was having trouble maintaining above 60.Throw all the EW and Fibb to the sidelines, this is very basic trend analysis. This is why I have emphasized use EW and Fibb for a guidance but the trend is the most important, and many "experienced" traders fell into this trap as well. The market trend was telling us no new money is flowing in, as we mentioned several times, this was clearly a market rotation why make risky trades?

So where are we? Well we are sitting on a good stack of cash waiting PATIENTLY for some good trades or to add to our long term investments as we have been for over a week now. This is where patience pays off and as good coins get crushed we will be waiting to pick them up cheap Buffet Style. Simply because we were prepared and did not swing trade here!

From the chart on BTC you can see $4800-$5000 is our target range for a rebound, but this does not mean one will not happen as $5200 is the 0.382 level. So be careful shorting here as we missed the breakout from $5451. You can scalp trader here but if you are not seasoned it could be painful. Your best off watching the correction unfold and sitting on cash looking for deals. The final test will be if BTC' retests the $5445 level. If it breaks this level then we could continue higher so BE CAREFUL. But I expect it either to fall short or bounce off and head down towards the $4800-$5000 level which both will be met with great resistance. Failure to hold the $4800 level then the extended top we posted a few days ago, is in play for $3000ish.

Nothing chart wise has changed since we posted the French Fries and Gravy post, or Fork in the Road, so for more in-depth look you can refer to that article as nothing has changed.

Comment: It's all about risk to reward and though we got a lot of negative comments on it, this scenario would have paid off nicely. To be honest I did not trade it as I thought $6000 would be tested and it is where I was intending on shorting if the market was right. But this shows finding high risk to reward trades outside the typical swing trade is critical to making money.
Comment: Note the symmetry for the bull run and current bear run are very similar! Just trends to watch for when looking for a bottom to buy!
Comment: Just an update, to see if anything is out of the ordinary or invalidating a continuation lower. RSI appears to be failing at the 60 which would be expected as bear markets trade between 30 and 60. It retested the previous support resistance line but this again is quite common, we expect it to pullback to the 0.382 thru 0.618 retracement level, it's right there with the previous support resistance line at $5600. So let's see if we go lower from here.
Comment: I get a lot of questions on the RSI. The RSI is in my opinion the most powerful tool for a trader to master. Even as an investor. There is a misconception of how to use it for just overbought oversold, but if you understand it is really a gauge of the strength of a market and not only when you should trade, but more importantly when you shouldn't. If you master one indicator it should be the RSI period! before EW or Fibb even.
Comment: The EW count. This is why I am not trading here as this is a very difficult count to trade. These are the two scenarios. To dismiss one would mean you are not a trader. Both are valid counts. One is invalidated at $6250 and the other is invalidated at $4000.
Comment: Parallel to May June Correction, thank you Andrew McElroy for pointing this out.
Comment: Though the chart above clearly shows a path to $6000 which was our original target price seeing how the market recovered on the bounce it is likely to happen. I would look at the risk to reward before making a trade as the swings are volatile and the larger players know everyone is looking at $6000. $300 is not a lot of reward and there is a lot of downside risk as you can see from the May-June Comparison. I think there are better setups for shorter term trades like DASH ETH NEO and OMG with less monies risked. I am really like DASH here and will monitor if a trade comes to fruition.
BTC will not crash. Thats for sure. To think Bitcoin Gold might trade for only 10% of the value of BTC, its amazing to see how much effort is being put to get those coins. Will be fun watching what unfolds and what they have planned.

In the next few days what are they going to do except to twiddling their thumb. Maybe some drama in XRP and Neo is coming.
+2 Reply
goldbug1 neerajniccu
@neerajniccu, It may not and that is always a possibility but this could be the 3rd lower high which with the lower lows is still a bearish sign. I think many look at $200-$300 day movements and not at the percentage movements.

If this was intel trading at $58 and it fell to $54 that is not very much and percentage wise is comparible to $5800 to $5400. But buying at $5800 for $600 (which I doubt gold holds) is not wise in my opinion. I saw on one exchange it was trading at around 3 cents. And BT2 trading around $600. So if there is any issues with BT2 then a correction could be huge, which is the reason I'm staying away from trading long here even though $6100ish is a target price.

Risk to reward would be buying here for $400 profit with a correction of $1200 possible. Not sure that is a good risk to reward, actually it's a recipe for disaster! Hence my bearish stance! All about risk to reward in the mid term not long term holdings which I still hold! (on a private wallet of course)
goldbug1, this is a really interesting post. Thanks for sharing your knowledge. Sometimes I get caught up in the frenzy, trying to add the 'easy money'. It rarely works out spectacularly. Patience and knowledge will earn me more $$$ in the long run.
I will look forward to your analysis of DASH.
+1 Reply
@lededj, Thanks, patience and cash is key!
Hello. Sorry for OT.
A have a question regarding market cap and trade volume ->
What do you think about it? (last 3 months) Does this chart can tell as something?
Many people think, that after BTC fork, BTC will fall and all money will flow to alts so they catch up with BTC (whatever it means..)
and we see new ATH... I'm not sure about this.
+1 Reply
goldbug1 Konran_Taisa
@Konran_Taisa, Yes, with the market cap you can see if any new money is coming into the market or whether it's just rotating from BTC to alt coins. I think it is very clear it's a rotation in my opinion.

Need a good correction to bring new money in and to forge higher towards 10k!
@goldbug1, sorry I, its not exactly what I meant. May fault. I was thinking more about alts. Lets say, that after fork we'll see BTC again around 5k.
In this scenario money from BTC should flow into alts. The question is if alts will go higher than they were before "the dip" caused by BTC, before BTC broke 4.9k resistance or will they back where they before. I have a strange feeling, that traded volume is much smaller that it was after September dip and there's less money in the market or maybe many people gone long? It seems that there was some damage done by China's FUD and its not even the matter of chinese markets, because volume dropped instantly, way before their official closing. Maybe I\m just imagine things...
+1 Reply
goldbug1 Konran_Taisa
@Konran_Taisa, Nope great observaion! It's critical to see where the money is flowing.
Hi @goldbug1 what do you suggest for someone who has not invested in BTC yet? Wait for a dip to have a better entry or just buy and HODL?
+1 Reply
@dino199, You can always enter in blocks like 1/4 at a time and then look to add on dips. I would not go all in at a top though, but doesn't hurt ever to have some!
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