Why I shorted BTC while most are buying the dip
Let me break down my reasoning:
I began to build a short position in BTC on April 10 at an average price of $6895, then when price smashed through the 6907 level and the following candles did not sell off aggressively, I closed the trade at $6924 for a 0.4% loss. After that, the price blasted up, but I didn't chase it.
When price reached the 2020 yearly open at $7165, I knew that was a key resistance level. Notice how closely the price comes to the descending trendline, which can be followed on the 12-hour timeframe to as high as $10,300. I placed some short orders around the yearly open, which were filled at roughly 11:45am with a stop above $7350. Price has dropped since then and as of this writing the position sits in about $500 profit.
What trading opportunities are out there for us today?
What price is telling me is that the recent climb to the yearly open was a bull trap. However, looking at the SP500 mini futures (ES1!) from the same time period you’ll notice that BTC was actually following the same downside movement as the SP500. Therefore, this price movement may imply that the two markets are correlated.
Yesterday BTC’s daily candle was ugly. Price tapped the yearly open and today's candle looks bearish so far. If I get a close below the wick around $6571 then I’d feel confident price is headed towards $6200. If you look at the 4-hour timeframe, $6200 was the previous support-resistance level from the middle of the COVID-19 sell-off around March 11.
I would say the head and shoulders pattern that our community spotted the other day has been validated, given the fact that price pierced through the neckline. Now we want to see more follow through over the next 24 to 48 hours.
This is what you would consider if I was looking for a trade. First, if price starts to break above this 6754.5, let's imagine it’s a quick wick before price breaks down again, this would be an opportunity to short BTC with a stop above the range at 6946 or a deeper stop above the yearly open. This is not financial advice, it is only what I would personally consider doing if price plays out in that way.
If I was looking to open a long position, this is the best place as there’s already been a large drop followed by consolidation. I would place my stop below $6560, then target all the black markers in the chart above as high as $7160. I don't think that bitcoin price action is going to go up here, supported by the fact that I’m already in a short position as mentioned earlier.
In summary, I am short based on the bigger picture of the descending trendline, price rejecting the yearly open, and price’s breakdown from the ascending channel. If price reclaims the range of 6754.5 to 6946, that would be the area to consider longing. Now let’s return to the macro perspective. How might the global economy affect prices moving forward?
Yesterday, a deal was reached with OPEC. Russia, Saudi Arabia, and Mexico all agreed to cut their oil production. Looking at the daily timeframe, I believe oil remains overvalued because people aren't moving around. Airline traffic is still down 50 to 70% with cruise lines experiencing similar numbers, that is an indication that demand for oil is low.
Additionally, oil supply is in excess because Russia and Saudi Arabia continued pumping up until the deal was reached. Oil tanker stocks are rising because someone has to store the oil. Moving forward, my sweet spot for oil price is between $13 and $16. If oil prices are crushed again, what does that mean for the equity markets? Oil shares a huge portion of global GDP. Oil rigs shut down and people lose jobs, the s&p 500 will likely continue to sell off. Equities are already looking a bit toppy, in my opinion. If you look at the daily chart, there is a clear abandoned baby pattern. What does all this mean for BTC?
Remember, no matter how much you love Bitcoin and crypto, it will not be immune to a recessive environment. Cryptocurrencies are speculative assets and will probably get torched just like they did in March alongside equities. The rest of this week is very important to watch in terms of the s&p 500 and US equities. Futures are already opening in the negative while the performance of global markets are a mixed bag due to the Easter holiday.
Looking at the weekly chart, last week’s candle close can be seen as a gravestone doji or evening star. If this current week closes bearish, chances are higher that BTC gravitates toward $2400, but there are several levels in between.
A Summary of my recent wins and losses: I lost a short trade by about $30 and then captured another short trade that's now $500 in profit.
Take care. Keep your stops tight, and don't lose your shirt.
I began to build a short position in BTC on April 10 at an average price of $6895, then when price smashed through the 6907 level and the following candles did not sell off aggressively, I closed the trade at $6924 for a 0.4% loss. After that, the price blasted up, but I didn't chase it.
When price reached the 2020 yearly open at $7165, I knew that was a key resistance level. Notice how closely the price comes to the descending trendline, which can be followed on the 12-hour timeframe to as high as $10,300. I placed some short orders around the yearly open, which were filled at roughly 11:45am with a stop above $7350. Price has dropped since then and as of this writing the position sits in about $500 profit.
What trading opportunities are out there for us today?
What price is telling me is that the recent climb to the yearly open was a bull trap. However, looking at the SP500 mini futures (ES1!) from the same time period you’ll notice that BTC was actually following the same downside movement as the SP500. Therefore, this price movement may imply that the two markets are correlated.
Yesterday BTC’s daily candle was ugly. Price tapped the yearly open and today's candle looks bearish so far. If I get a close below the wick around $6571 then I’d feel confident price is headed towards $6200. If you look at the 4-hour timeframe, $6200 was the previous support-resistance level from the middle of the COVID-19 sell-off around March 11.
I would say the head and shoulders pattern that our community spotted the other day has been validated, given the fact that price pierced through the neckline. Now we want to see more follow through over the next 24 to 48 hours.
This is what you would consider if I was looking for a trade. First, if price starts to break above this 6754.5, let's imagine it’s a quick wick before price breaks down again, this would be an opportunity to short BTC with a stop above the range at 6946 or a deeper stop above the yearly open. This is not financial advice, it is only what I would personally consider doing if price plays out in that way.
If I was looking to open a long position, this is the best place as there’s already been a large drop followed by consolidation. I would place my stop below $6560, then target all the black markers in the chart above as high as $7160. I don't think that bitcoin price action is going to go up here, supported by the fact that I’m already in a short position as mentioned earlier.
In summary, I am short based on the bigger picture of the descending trendline, price rejecting the yearly open, and price’s breakdown from the ascending channel. If price reclaims the range of 6754.5 to 6946, that would be the area to consider longing. Now let’s return to the macro perspective. How might the global economy affect prices moving forward?
Yesterday, a deal was reached with OPEC. Russia, Saudi Arabia, and Mexico all agreed to cut their oil production. Looking at the daily timeframe, I believe oil remains overvalued because people aren't moving around. Airline traffic is still down 50 to 70% with cruise lines experiencing similar numbers, that is an indication that demand for oil is low.
Additionally, oil supply is in excess because Russia and Saudi Arabia continued pumping up until the deal was reached. Oil tanker stocks are rising because someone has to store the oil. Moving forward, my sweet spot for oil price is between $13 and $16. If oil prices are crushed again, what does that mean for the equity markets? Oil shares a huge portion of global GDP. Oil rigs shut down and people lose jobs, the s&p 500 will likely continue to sell off. Equities are already looking a bit toppy, in my opinion. If you look at the daily chart, there is a clear abandoned baby pattern. What does all this mean for BTC?
Remember, no matter how much you love Bitcoin and crypto, it will not be immune to a recessive environment. Cryptocurrencies are speculative assets and will probably get torched just like they did in March alongside equities. The rest of this week is very important to watch in terms of the s&p 500 and US equities. Futures are already opening in the negative while the performance of global markets are a mixed bag due to the Easter holiday.
Looking at the weekly chart, last week’s candle close can be seen as a gravestone doji or evening star. If this current week closes bearish, chances are higher that BTC gravitates toward $2400, but there are several levels in between.
A Summary of my recent wins and losses: I lost a short trade by about $30 and then captured another short trade that's now $500 in profit.
Take care. Keep your stops tight, and don't lose your shirt.
Comment:
Equities posting the abandoned baby pattern + 50% fib
Comment:
Strong rejections on the weekly prev. consolidation + 2020 yearly Open at 7165
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