Regera

BTC finds support and signals reversal

Long
BINANCE:BTCUSDT   Bitcoin / TetherUS
Currently BTC has found support at the 13 month baseline (green) and the daily candles are forming a bullish tweezer reversal formation. Looking at the expanded view BTC could be forming the right shoulder of an inverted head and shoulder formation and would support a move upwards to coincide with the halving that's approaching this May. RSI is nearing oversold territory and its baseline support dating back to Oct of last year when BTC completed its reversal off of the double top /bump and run formation.

It's possible for BTC to break below and retest the ~$6800 level but I believe that to be unlikely. BTC is more likely to consolidate over the next month and trade within the baseline support and minor upper resistance (dotted green) / minor Fib (4.236 blue). After the consolidation the next resistances to overcome (mid level sell targets) are the minor and major Fib (4.236 blue and 0.382 white) as well as the 2019 confirmation line. The high sell target is a higher high at the cross section resistance (red dotted) and next major Fib resistance (0.5 white).

At these levels I'm much more comfortable swing trading. Selling at resistances and buying at supports can be quite lucrative leading up to the halving. Once the halving occurs it'd be wise to have a strong cash position and wait and see how the market reacts.
Comment: This aged well. BTC crashed below support and the next level of support is the 1.618 blue fib (~$5,400) and the red baseline around $5,000. The green baseline now acts as resistance so in keeping with my strategy I'll be buying the supports and selling the resistances with that green baseline as the updated sell off target. Bears are back in control so it'll be interesting to see how long they retain it leading up to the halving.
Comment:
BTC has been hitting Fiv resistance at the $6600-6800 level with a series of higher lows to create an ascending triangle formation. This suggests a continuation move upwards where the updated selloff is the green baseline now turned resistance.

It's possible for BTC to move higher but at this point with all the uncertainty it's best to break even from the initial entry at support and profit from the positions added from the $5000 and $5400 levels.
Comment:
As expected, BTC got rejected at the daily 50MA. Since then it's been trading above the $6600-6800 level and since it didn't drop like a rock that gives credibility to the notion of a move higher for BTC in the coming months. The retest of the 50MA will be crucial in terms of what BTC will do next. If it breaks above and confirms I'd expect it to move towards the $9000-9500 range. If it gets rejected again BTC could retest the ~$5000 support level.

There's a LOT of conflicting signals. Let's start with the daily chart on the left. The short term baseline is relatively intact, price has been trading above the Fib resistance (turned support, at least for now) however I don't like that the RSI trendline has been broken and that the MACD is hinting a bearish crossover.

On the weekly volume has been slowly declining but is still well above the average and its RSI trendline is intact with the MACD showing a possible crossover to the bullish side. It's important to note that the volume from the BTC crash was less than the following candles showing the recovery. This suggests that the $5000 support is quite strong and that the market overreacted to the stock market/corona virus panic.

Given the updated chart I'm going to tweak my exit strategy a little bit. The positions I took at $5000 and $5400 are going to be sold off leading up to the 50MA retest. The positions I took at the baseline support around $8000 will be held until BTC breaks $9000 or triggers at stop loss around $6600-6700. Straddling like this will turn an overall profit in the worst case scenario and I'll be fully reloaded for the next trade setup. Best case scenario I will have laddered profits and the crypto world will be in a much better position for future growth.

Lastly, alts have been holding pretty steady. Typically if BTC is poised for a major drop, alts dump first so until that happens I'm cautiously optimistic that the market is consolidating before moving higher.
Trade closed: target reached:
BTC rejected again at the 50MA before dropping to ~$6600 so both target and stoploss were hit competing the trade. The blended ROI of all trades is about 20% which highlights the importance of proper risk management and trading plan when things don't go as expected.

Currently BTC has broken below the short term baseline, the weekly candle just printed a reversal and the daily MACD bearish crossover is appearing more likely. With BTC trading under the 50MA, baseline and $$800 Fib it would take a powerful surge to overcome and the market hasn't shown much if any indication that the bulls are ready to buck the trend.

Targets for reentry are $6200, $5400 and $5000.
Comment: BTC has broken just above the 50MA with volume increasing above the MA. Alts are responding well with strong gains so it's a possibility that BTC could be making a move up. However, it's not an ideal setup so I'm going to sit this one out. Next major resistance is the weekly 50MA at ~$8500 then the confirmation levels in the $9000-9500 range so there's still quite a bit of resistance to overcome before BTC breaks out of its bearish triangle.
Comment: Forgot to mention the trendline resistances at $7800 & $8000. These are significant and should have been included in my last comment.
Comment:
Despite a break above the daily 50MA, BTC is still showing a lot of mixed signals/indecision. Right now BTC is at a critical support. If that support doesn't hold we could experience a significant break downwards whereas if it breaks upwards there's still a lot of resistance to overcome. For that reason I'm keeping my cash position until the market makes a decisive move and a more ideal setup comes along.
Comment:
BTC reversed off of the $9500 upper resistance level that coincides with the trendline resistance (yellow) that's part of the larger descending triangle formation. This latest move shows some bullish strength leading up to the halvening but make no mistake the long term formation is still bearish until that resistance has been cleared and confirmed on longer timescales with proper volume to substantiate the move.

My play here is to reenter the throwback supports at $8000-8200, the mean reversion at $7300, Fib support at $5500-6800 and the bottom trendline support ~$5300 with a total selloff at the confirmation zone/downtrend resistance line ~$9000.
Comment: Well that dropped quickly! That's why I wait for ideal trade setups. This has already wiped away 10 days of gains so to say bearish engulfing is an understatement. $8200 buys were taken and I might dump it for a quick profit (like 10 minutes quick LOL). This selloff is steep so it's best to let the market decide where support lies. The deeper buys at the bottom supports are still in play.
Comment: It's definitely premature but my read on the volume and price action is that the $8200 trendline is going to be the short term support. If and when it breaks $6800 is the next support target.
Comment:
MACD crossover on the daily suggests short/mid term downward movement. Daily/Weekly RSI upper trendlines have been reached substantiating the daily MACD for a move down. On the positive side the weekly MACD crossover points to long term upward movement. All of this is inline with prior halvenings when BTC drops after the halvening date, consolidates then goes on a major bull run.

However, COVID19 is a wildcard that could stifle the growth BTC went on in prior years especially if the world reopens and the 2nd wave is worst than the first. The US Government has spent trillions of dollars to bring stability to the market and if the 2nd wave is as bad (or worse) than the first then all markets could really suffer.

Remember, prudent investors protect their capital and cash is king when the going gets tough. In addition, prior history does not guarantee future results so there's a lot to digest before long term positions are taken.
Trade closed: target reached: Swing trade from $8200 support has entered $9300-9500 resistance zone for selloff. Now it's wait and see how BTC reacts post halvening.
Comment:
2 days to go before the weekly candle closes. If BTC closes under $9,000 then it would form a tweezer top which is a strong reversal signal. The daily MACD has crossed downwards and the RSI has broken below its trendline support, retested the trendline and failed. The weekly MACD crossed upwards briefly if it crosses under in the coming weeks then it could very well mean BTC is headed back down to the $3-4k range (or even lower). The weekly RSI has broken above the RSI trendline resistance however there's it'll be another 10-21 days before we know for sure.

The next key supports are the 50MA and baseline support in the $8500-8700 range. I may take some small positions in that zone then flip it for a quick profit but make no mistake I'm 100% in cash ready to reload.
Comment:
I'm primarily a day trader and when price moved above my swing targets ($9300-9500) I won't even attempt to trade because it can drop quickly. I witnessed this live and knew the reversal was right around the corner. Not all reversals are this obvious but when BTC does a U turn like this (not once but twice) and the sell volumes exceed the buy volume, there's a good reason why: smart money is dumping. I don't use day trading time frames to call reversals but when I see this and pair it with the daily and weekly charts it's no surprise BTC stalled out.
Comment:
Total market cap is up against trendline heavy resistance. Most major alts are up against heavy trendline resistance and BTC is up against heavy trendline resistance. Illogical rises into such heavy resistance means a big move is coming and it's best to wait and see which way it goes. New weekly candle starts tonight and a lot can happen between now and then.
Comment: BTC is lingering right below resistance and has formed another ascending triangle on the smaller time frames. Price stayed above $9,000 and convincingly so which adds fuel to the bullish fire.

Alt/BTC pairings have moved towards more neutral/favorable territory. I'm still going to wait and see but the recent price action is giving credibility for a move to $10.5k and if it breaks above, $13k+. The bulls have pushed several times and I've seen them get turned around in less than an hour on several occasions so it's really a question of which way is it going to tilt. Daily volume has been suspect for several reasons and it's difficult to apply it in any meaningful way.

The #1 rule is to protect capital and at this point it could go either way. Despite how tempting it may be to participate in this move up, it would be more devastating to recover from the drop vs. waiting for an ideal trade setup.
Trade active:
I'm taking a position at the baseline/fib support.
Trade closed manually: BTC broke below minor and major baseline supports and the target of $9900 - $10.500 is looking less and less likely so I'm closing my position at $8900 for a ~1% loss.
Comment: Beware the alt trap! I've seen this so many times before. BTC drops below a key support and holds while alts illogically gain double digits. Sheep panic and chase the gains then BTC drops further and alts break down hard and fast. Along the way traders think they're buying value relative to the alt's recent highs only to find that it'll be months (even years) before alts hit bottom. Ask anyone who bought alts in 2018.

Make no mistake this formation is bearish and if history repeats BTC will drop after the halvening before it rises. Unless some major bullish surge comes along for no good technical reason, BTC is heading down and the alts will not be as kind.
Comment:
BTC broke below a key baseline support (red) and the throwback to the support now turned resistance has been below average which suggests that a downward move is imminent. A throwback is when price breaks above resistance then the proceeding selloff retests the resistance turned support before making a higher move up. Conversely the pullback is when price breaks below support and sluggish buying retests the support now turned resistance. From a trading perspective it's prudent to buy the throwback and sell the pullback, especially when volume is below the moving average.

Over the short term BTC may trade within the teal triangle that encompasses the space between downtrend resistances and the weekly 50MA. Both the resistance and 50MA have been pierced so neither are showing more strength than the other and BTC has shown a willingness to break through either even if it is only for a short time. It could be argued that BTC could break either way but I tend to lean bearish because the overall formation is bearish. One important point about bearish formations is that they're bearish until they're broken and patterns break when they're tested 3+ times over the course of months and or years. Technically we're at the 2nd retest so while it's possible for the formation to break here prudent traders don't take that gamble. We wait and see how the market moves and react accordingly when a high probability trade setup comes along. For that reason I'm still in cash waiting to see which way the market decides to break.
Comment:
Bulls just got trapped after price faked out above the teal triangle and got rejected hard at the long term downtrend resistance. It's a near certainty that BTC is heading down and while it's a little premature, the latest daily and weekly candles will likely print bearish engulfing, furthering the move down. Patience is key here. Those who try and catch a falling knife usually end up bleeding so I'm going to enjoy my cash position while this all plays out.

Comments

ALSO, if bitcoin breaks to the downside, there are some shit-coins also close to make all time lows. Interesting times
Reply
Regera TWIMARKETCAP
@TWIMARKETCAP, Yes, the Alt/BTC pairings are in a really bad position. When BTC rises, they fall. When BTC falls, they fall harder. I'm really concerned with the LTC/BTC pairing. It broke below a long term trendline and if BTC falls here alts can take a real beating.
+1 Reply
@Regera, I agree! I have been noticing that wave too in the last 2 years, it comes and goes, when BTC goes up alts-btc goes down, when btc goes down alts-btc go down deeper, maybe because there is not new money coming in, just money from alts moving into btc. I think we will see a wave of alts dying pretty soon. 6000+ alts doing almost the same is ridiculous.
Reply
Regera TWIMARKETCAP
@TWIMARKETCAP, Agreed. BTC is poised to make a big move up or down and either way alts will hold if it goes up or plummet if it goes down. Anyone who is holding alts right now needs a lesson on risk management.
+1 Reply
Good TA... but so far bitcoin has been hand to hand with the stock market, and the stock market currently doesn't look too good to be bullish. It will be interesting to see what will happen with bitcoin if the stock market drops big, how far down will bitcoin go? and of course since bitcoin exchanges are not regulated, they can pump left and right and cheat the regular guys who want to make some money with day trading. Like you said: proper risk management and trading plan are very important.
Reply
Regera TWIMARKETCAP
@TWIMARKETCAP, The stock market has been literally propped up with trillions of dollars. If that doesn't stop the bleeding, nothing will. The media has completely blown COVID19 out of proportion and the real question is whether or not the market buys into that BS when it's time to get back to work.
Reply
@Regera, exactly, they can't print money forever and is difficult to point a finger. China lied, media exaggerated, trump acted late, and not country was ready for this. but it will be interesting since millions lost and will lose their job, business will not open 100% like they were before, and lots of business will be forced to declare bankrupt. We are passing through in an interesting chapter of the human history and we will see how long bitcoin can live or what will happen with the blockchain technology.
Reply
What about the H&S we just broke down from? towards the $6200- $6400 area, do you think is possible?
Reply
Regera TWIMARKETCAP
@TWIMARKETCAP, Anything is possible however I tend to favor the larger, long term formation over the shorter term structures. Moreover, if you look at my linked "Updated prior BTC charts" idea take a look at the red circle in June of 2019. That was a shorter term head and shoulder pattern that failed (BTC rose +70% from the base of the "right shoulder"). Lastly, if you compare phases 1-6 in the same idea (in which BTC's movements were nearly identical) then BTC should at the very least have an upward movement if not a higher high. Does past performance guarantee future results? Of course not but given the market environment (halving approaching, overreaction/selling in all markets in response to the corona virus) I believe there's a strong likelihood of another move up before markets decide if they're going to tank or resume the upward trend.
+1 Reply
@Regera, ok I agree with your theory and the coronavirus, plus you have a lot of charts here in which you hit the target. Saying that I just want to mention 2 things: 1: The coronavirus is just starting, and that might send the stock market and all the cryptos down. 2: The H&S that you mention from june 2019, that never broke to the downside, while the current one already broke down. Lets see how it plays, it is interesting!
+1 Reply
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