More Tears For Moon Boys

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
BTCUSD closed under the 200 EMA on the 3-day chart. Historically, this had led to a prolonged downtrend every single time:
Will this time be different? Probably not.

Risk/reward is easily manageable in this area:
  • I would consider this idea invalidated once BTCUSD wicks above the previous 3-day candle. For that to happen, we have to cross through both the 0.618 Fib level at 7204 and the 200 EMA at 7306 before reaching our stop/loss around the 7400 resistance level .
  • On the other hand, if this idea plays out, BTCUSD will take out the previous low at 6515. The next area of support is around the 0.764 Fib level (5640). That makes for a well-defined target.

With a risk/reward ratio of 3.96, we are getting excellent odds on our bearish bet. This idea only has to work a bit over 20% of the time to be profitable in the long run. I would love to see bitcoin go to a trillion dollars by tomorrow but, when the trend is down, it's so much easier to join Team Bear than trying to catch the bottom.

The only clear counter-argument is that BTCUSD still hovers around the massive resistance zone at 7000. The monthly 21 EMA is at 7038 and the weekly 100 EMA at 7030. These EMA's are usually not that easy to break. However, BTCUSD has been smashing through tons of hopes, dreams, resistance levels, and moving averages for the last three weeks. We already pierced through 7000 a couple of times. There has been no massive bounce away from here (yet). That makes bulls and other moon boys look pretty weak. The advantage is with the bears. The longer BTCUSD keeps grinding at this support level , the stronger the bears get. So, again, going with the trend while keeping a well-defined stop/loss in place is the easiest way to come out ahead in this game we play.


Well thought out! Thanks!
+1 Reply
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