Break Out Possible While Everyone Is Bearish? (High Risk Trade)
Good morning traders!
First off, thanks for all of the support on my previous analysis and if you enjoy this one, please consider clicking like below to support me. :)
Secondly, don't yell if this trade doesn't work out... look at the title (high risk.)
We've had an interesting few days of bitcoin price action as low time frame traders are getting chopped up with lots of wicks going up and down after with the recent attempt at $9,000.
I myself was very bearish around the $8600-$9000 level as volume was dropping off and divergences were showing up on most time frames.
I even had my trading members move 100% to cash and close out all of their positions.
At first, this received a lot of grumbling, but now they are happy as they've seen the recent price action and have saved themselves a 10% drawdown on Bitcoin.
I initially had a target of $7200, which would complete the CME gap fill as well as retrace to the 50MA on the daily (which may still be valid), but I am seeing a potential retest incoming similar to what we saw May 15-17th.
I wanted to get this analysis out so that you could see other potential scenario's rather than the doom and gloom on twitter and trading view. This set-up is easily invalidated and the risk is low as we know where our support level is ($7450) as well as the 200MA on the 4 hour.
My disclaimer here, before we begin:
Buying here is buying into a down trend and attempting to catch a knife, which is not usually recommended and not the most ideal set-up. So, exercise caution and make sure you use your stop losses in case my analysis ends up being incorrect. (that happens from time to time.)
If you missed my previous analysis, please check it out here where I covered the bearishness around the $8800 level.
Overall, I assumed that if we broke the 20MA on the daily, we would naturally retest the 50MA on the daily similar to back in 2017.
Looking at the 4 hour, however, I see that we've got a lot of support on the 200MA on the 4 hour chart.
This has held us up since February when we were sitting around $3500. Needless to say, this is a strong suport at the moment.
High time frame, you can see that we are breaking down to previous resistance levels from the 2018 bear market.
The previous break down hit $6400 and this recent break down hit $7450 with precision.
My trade set-up:
ENTRY: $7650 (already tagged)
Stop Loss: $7400 (loose), $7600 (tight)
Target: $8300 (I will trail my stop if the trade moves up hopefully tagging the low before pushing to retest the highs.)
Risk/Reward Calculation: $650 / $250 = 2.6 RR
Potential Loss: 3% (loose), .9% (tight)
For those looking for the bearish scenario:
From my previous analysis, the $7200 zone is a gap fill on the futures market.
Again, this is higher risk as the set-up is not confirmed and is more of a 'buy the knife' trade set-up.
Confirmation of bearish or bullish will be determined by the next move on this 4 hour triangle.
First off, thanks for all of the support on my previous analysis and if you enjoy this one, please consider clicking like below to support me. :)
Secondly, don't yell if this trade doesn't work out... look at the title (high risk.)
We've had an interesting few days of bitcoin price action as low time frame traders are getting chopped up with lots of wicks going up and down after with the recent attempt at $9,000.
I myself was very bearish around the $8600-$9000 level as volume was dropping off and divergences were showing up on most time frames.
I even had my trading members move 100% to cash and close out all of their positions.
At first, this received a lot of grumbling, but now they are happy as they've seen the recent price action and have saved themselves a 10% drawdown on Bitcoin.
I initially had a target of $7200, which would complete the CME gap fill as well as retrace to the 50MA on the daily (which may still be valid), but I am seeing a potential retest incoming similar to what we saw May 15-17th.
I wanted to get this analysis out so that you could see other potential scenario's rather than the doom and gloom on twitter and trading view. This set-up is easily invalidated and the risk is low as we know where our support level is ($7450) as well as the 200MA on the 4 hour.
My disclaimer here, before we begin:
Buying here is buying into a down trend and attempting to catch a knife, which is not usually recommended and not the most ideal set-up. So, exercise caution and make sure you use your stop losses in case my analysis ends up being incorrect. (that happens from time to time.)
If you missed my previous analysis, please check it out here where I covered the bearishness around the $8800 level.
Overall, I assumed that if we broke the 20MA on the daily, we would naturally retest the 50MA on the daily similar to back in 2017.
Looking at the 4 hour, however, I see that we've got a lot of support on the 200MA on the 4 hour chart.
This has held us up since February when we were sitting around $3500. Needless to say, this is a strong suport at the moment.
High time frame, you can see that we are breaking down to previous resistance levels from the 2018 bear market.
The previous break down hit $6400 and this recent break down hit $7450 with precision.
My trade set-up:
ENTRY: $7650 (already tagged)
Stop Loss: $7400 (loose), $7600 (tight)
Target: $8300 (I will trail my stop if the trade moves up hopefully tagging the low before pushing to retest the highs.)
Risk/Reward Calculation: $650 / $250 = 2.6 RR
Potential Loss: 3% (loose), .9% (tight)
For those looking for the bearish scenario:
From my previous analysis, the $7200 zone is a gap fill on the futures market.
Again, this is higher risk as the set-up is not confirmed and is more of a 'buy the knife' trade set-up.
Confirmation of bearish or bullish will be determined by the next move on this 4 hour triangle.
Comment:
Related Ideas
Obviously, it was a high risk trade counter trending the market. We got a small bounce, but it was pretty weak and sold off pretty quickly.
I'm watching for a close above or below the 4 hour 200MA.
We may see the $7200 nuke to fill the gap first.