Emotional retail traders and the precarious nature of shorts
Good morning, traders. It is Wednesday and CBOE Bitcoin futures expire today. Will this result in a jump of price? There is a strong narrative suggesting exactly that possibility as shorts continue to rise parabolically, quickly closing in their all time high and bringing with them a shorts-to-long ratio of 1.4251 currently. This ratio hasn't been seen since November 2017 and yet shorts continue to pile on providing us with a clear view of retail trader emotional entries into the market. Watching tucsky.github.io/SignificantTrades/ play us the same story over and again: price jumps up, retail traders attempt to "short the top," price moves $40 higher and those positions are liquidated. Over-leveraged, under-capitalized emotional trading will get you rekt, so make sure you aren't doing the same. If you missed last night's live stream, I also took a quick look at ETH, XRP, and ETC.
Overnight we saw a move up to $6483 (the lower TF pivot) before a bit of retracement. A push up through this pivot would be a bullish indicator, at least on the lower TFs and we should then expect price to target the R1 pivot. Looking at TensorCharts.com, we can see strong resistance building up at $6480, $6650, and $6700 at this time. We should see short squeezes occurring as price pushes through these levels. We have some support building around $6220 but not much else at this time. The perfect storm mentioned above has been building and the expiration of the CBOE futures today could be the catalyst that sends things into motion. We will have to wait and see. Until then, price appears to be printing a bullish pennant on the 1H chart. If it completes successfully, then we can expect an initial target of the $7000 level which is the R1 pivot, and if we are seeing that kind of price level, the bias should be continued upward momentum. Remember, a breach of $8500 prints another higher high thereby increasing the bullishness. However, we could see price contained by the $6800 block prior to reaching that target. As always, we want to watch volume and price action. Volume increasing as price rises is a strong bullish indicator which appears to be ignored lately by the emotional retail crowd expecting a drop below $5000 and subsequent repeat of 2014. While there are no guarantees in trading, I choose to give much more weight to such an agreement between volume and price action than anything else, especially right now. Daily Stoch RSI is finally making a push out of the oversold area as RSI is testing its own resistance at 42. Daily MACD has noted resistance around 430 on its last two highs, but is also printing a higher low suggesting momentum is building toward a breach of that resistance. It's my belief that if we see MACD printing a higher high, then it will suggest that we are in a bull market. The 3D MACD has printed consistent higher highs and lows since its low point around April 7th, but remains below centerline at this time. Weekly Stoch RSI is printing higher highs and lows and its MACD found its bottom, so far, during the week of July 9th. A strong weekly candle here, and potentially next week, should see a bullish cross on that TF's MACD.
The 3D and weekly candles look amazing at the moment, however there is still much time left for the latter and anything can happen before it closes. But if they both close at or near their current states then it creates significant bullishness on much larger TFs and the expectation should then be a likely test of the recent high at $8500. As such, they should be watched closely. CME Bitcoin futures expire at the end of the month, so traders should be paying attention to that as well. We continue to monitor the lower levels noted on the 1H chart in case of a price drop. Realistically, I expect price to target the $6800 box and then drop down toward ~$6200 before pushing back up once more and breaching that box. However, the precarious nature of the shorts right now could catapult price through that
Overnight we saw a move up to $6483 (the lower TF pivot) before a bit of retracement. A push up through this pivot would be a bullish indicator, at least on the lower TFs and we should then expect price to target the R1 pivot. Looking at TensorCharts.com, we can see strong resistance building up at $6480, $6650, and $6700 at this time. We should see short squeezes occurring as price pushes through these levels. We have some support building around $6220 but not much else at this time. The perfect storm mentioned above has been building and the expiration of the CBOE futures today could be the catalyst that sends things into motion. We will have to wait and see. Until then, price appears to be printing a bullish pennant on the 1H chart. If it completes successfully, then we can expect an initial target of the $7000 level which is the R1 pivot, and if we are seeing that kind of price level, the bias should be continued upward momentum. Remember, a breach of $8500 prints another higher high thereby increasing the bullishness. However, we could see price contained by the $6800 block prior to reaching that target. As always, we want to watch volume and price action. Volume increasing as price rises is a strong bullish indicator which appears to be ignored lately by the emotional retail crowd expecting a drop below $5000 and subsequent repeat of 2014. While there are no guarantees in trading, I choose to give much more weight to such an agreement between volume and price action than anything else, especially right now. Daily Stoch RSI is finally making a push out of the oversold area as RSI is testing its own resistance at 42. Daily MACD has noted resistance around 430 on its last two highs, but is also printing a higher low suggesting momentum is building toward a breach of that resistance. It's my belief that if we see MACD printing a higher high, then it will suggest that we are in a bull market. The 3D MACD has printed consistent higher highs and lows since its low point around April 7th, but remains below centerline at this time. Weekly Stoch RSI is printing higher highs and lows and its MACD found its bottom, so far, during the week of July 9th. A strong weekly candle here, and potentially next week, should see a bullish cross on that TF's MACD.
The 3D and weekly candles look amazing at the moment, however there is still much time left for the latter and anything can happen before it closes. But if they both close at or near their current states then it creates significant bullishness on much larger TFs and the expectation should then be a likely test of the recent high at $8500. As such, they should be watched closely. CME Bitcoin futures expire at the end of the month, so traders should be paying attention to that as well. We continue to monitor the lower levels noted on the 1H chart in case of a price drop. Realistically, I expect price to target the $6800 box and then drop down toward ~$6200 before pushing back up once more and breaching that box. However, the precarious nature of the shorts right now could catapult price through that
Comment:
Also, remain aware that the pennant could become a flag, so we may see price moving a bit further down before up. At this time, it is a pennant however.
The 3D and weekly candles look amazing at the moment, however there is still much time left for the latter and anything can happen before it closes. But if they both close at or near their current states then it creates significant bullishness on much larger TFs and the expectation should then be a likely test of the recent high at $8500. As such, they should be watched closely. CME Bitcoin futures expire at the end of the month, so traders should be paying attention to that as well. We continue to monitor the lower levels noted on the 1H chart in case of a price drop. Realistically, I expect price to target the $6800 box and then drop down toward ~$6200 before pushing back up once more and breaching that box. However, the precarious nature of the shorts right now could catapult price through that box, so traders should remain mindful and trader accordingly.