I wrote about the 118 level recently and that level serves as the lower boundary of the reversal zone. If price is going to fake everyone out, it is most likely to happen in this zone which is basically an extension of the recent low. Price did just that. It went slightly lower, but the long wick indicates that the lower prices were rejected quickly. The market is showing that the 106 area is where the most buyers buy. In order for the reversal zone to be void, price needs to close below it. Breaking below and forming a wick is not a break with conviction.
Buying into the second low is not easy to do, and if you missed it, don't worry because there is another opportunity to buy into this market at attractive prices. Often when a market is transitioning out of a trend, it is a process, not a single event. In this case, the next part of the process that would offer another chance to buy is the higher low formation. Keep in mind the the 186 to 138 area is a .618 relevant to the largest structure. IF this market is going to find support and bounce, this is the zone where it is more likely for that process to unfold.
What needs to happen next in order to confirm the higher low is a candle formation or strong close combination. For example IF the current candle closes in its present configuration ( ) and the next candle breaks above the high, that is a confirmation and trigger to go long. Further confirmation would be the break of the that originates from the recent highs. Especially if this break coincides with a compromise of the recent peak in the 169 area.
What will negate this scenario is if price closes weak. If BTC retests its lows, this market is likely to follow. Any retest and reversal off the 118 level is another buying opportunity as well. Keep in mind the time horizon that I am evaluating is for position trading and possible swing trading. This means even though the most immediate movement may be , I am anticipating it can turn in order to be in line with the bigger picture and NOT react to the noise.
In summary, like I always say, it's not about being "right", it is about listening and adjusting. Since I can only play one side of the market, and since my long term outlook is , I am only interested in positioning for a broader rally which takes time to unfold. Buying in this zone is still attractive, but you must consider the risk which can be evaluated from the 106 low. The best way to participate in a broader rally is to build a position incrementally, so that you are immune to gyrations or selling spikes. Once the market confirms strength is returning, not only are you in a good position, but then you can add to a winner which is a more conservative position building strategy. Focus on the risks, know your personal loss limit and use these internal reference points to structure how aggressive or conservative you want to be. In this game, you make the rules that govern your actions, not outside forces like the market.
Questions and comments welcome.
Double bottom and higher low? Recipe for bearish trend line break. This is a significant sign of strength. The steep bullish candle is a typical sign of short covering and new longs reacting to the breakout. Often what follows this type of pattern is a retest of the bearish trend line which tends to act as a minor support. As this market continues, I will be anticipating support levels to hold, and resistances to break.