ETHUSD Update: Price went sub 200 only to push back up to 250 in a matter of hours, along with all the coin markets. Now you know why I suggested considering a small position as an investment. The bearish momentum is not over yet, and now these markets need time to build up some supportive structures again so I am not anticipating new highs any time soon.
The initial spike back up is an interesting piece of information. BTC went below 3k only to spike back up to 3500. This type of price action often signals the beginning of a change in momentum, but not enough evidence to start opening swing trade longs.
If you read my previous report, I wrote that investing small wasn't a bad idea because there was extreme fear in the market. Sure it got slightly more extreme, but if you believe in the technology (which has not changed), then investing when everyone is hating these coins is the best time. As I wrote, there is no way of pin pointing the bottom. It is a function of understanding your risk and starting small (without leverage). I don't think these markets are out of the clear yet and still have potential to test lows again. Just remember investing is for long term and NOT a swing trade strategy.
At this point I am watching for evidence of stability (for a swing trade) and that would be in the form of a higher low at the new minor support at the 220 to 210 area within the broader 230 to 190 area. A failed low here would offer a short term buying opportunity providing that BTC is also stable. Keep in mind since this market has revisited this broader support area which is the .618 of the previous bullish swing, the broader price action will most likely be range bound and I plan to use very conservative targets for any trades that I enter.
The new resistance area is the 271 to 291 zone which is related to the .618 of the overall bearish swing. This market needs to clear that in order to show that there is any possibility of retesting the mid to high 300s. So this resistance will serve as a profit target (if the market offers that opportunity). If the market retests this resistance sooner (it is almost there) this area will serve as a level for a possible lower high which can lead to new lows if BTC falls apart again. We just have to wait and see. As far as buying now, the risk is too high.
In order to know if a bottom is truly in place, price needs to retest the lows. That is why this price spike, as impressive as it is, is not the time to get long. The retest may lead to new lows, or it may be shallow, there is no way to know until after it unfolds. This is why it is so important to define your scenarios ahead of time so that you have something to measure against instead of being sucked into the herd mentality.
In summary, investing and trading are more about psychology than anything else. Price action analysis helps to uncover clues about the crowd mentality so that probabilities and risk can be better determined before taking a position. The purpose of my analysis is to capitalize on short term price fluctuations and I have to repeat this because I realize many new traders do not understand the difference between what I am writing about and buying to hold for the long term. My plan at the moment is to wait for the next retrace and if the market revisits the 220 area, then I evaluate for buy signals for a swing trade. Otherwise I stay flat. There will be plenty of opportunities to get long.
Marc, each day I wake up and speed off to work I find myself constantly checking to see if you have posted another update. I can't tell you how much I appreciate what you do. As a novice trader, I have been learning the hard way - but your content has truly been helpful in my continued education in trading.
Could you recommend any (easy to digest) literature / videos on the basics of trading (specifically within the crypto market)? I've been trying to source info on many of the topics which you cover such as using the Elliot wave, reading trends, reversals, double-bottoms..etc. Problem is that the internet is full of nonsense and over-hyped self-serving pitchmen.
Thanks again!
-Marco
MarcPMarkets
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@urioste, yeah tell me about it. Tons of hype. I am working on a video training course that I will release soon, and will address these elements that you mentioned. The coins are like any other market, with just some technical differences. Greed and fear still drive these prices like anything else. That is why methodologies like Elliott Wave work so well. PM me and I will provide you with a link to my ebook that will give you a better idea of how to use the forecasting elements that I use to write these evaluations.
Price action from $250 to $200 took several days to evolve, whereas price action from $200 to $250 was parabolic (hours) and therefore highly emotional (FOMO). This kind of parabolic price action is usually reversed by an equally parabolic return. In order for price action to be more stable, it should proceed more gradually, not suddenly and all at once. In fact, there is the very real possibility of a double-top which appears to be in the process of forming, which if confirmed at the neckline suggests a return to previous lows, and perhaps testing new lows. Be cautious.
I have learned a lot from reading your reports. They are very informative and insightful. Thank you!
MarcPMarkets
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@wuj, great I am glad you are learning from my analysis.
theexperientialist
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That rally was epic. I'm learning so much from following you and the market together.
I got caught short in btc... from $3,850 down to $3,600, tried to pick the bottom going long around $3,600 and again reversing @ $3,350 down to $3,000 it was all going pretty well... until all of a sudden it wasn't.
So much pain, so much learning.
And all this time you've been just watching patiently and sleeping peacefully. Genius!
MarcPMarkets
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@theexperientialist, hehe shorting these markets is certainly not easy. I am glad you are learning though.
max69
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interesting write up. Time to sit out for a while and watch.
Could you recommend any (easy to digest) literature / videos on the basics of trading (specifically within the crypto market)? I've been trying to source info on many of the topics which you cover such as using the Elliot wave, reading trends, reversals, double-bottoms..etc. Problem is that the internet is full of nonsense and over-hyped self-serving pitchmen.
Thanks again!
-Marco