I believe we are at an incredibly important spot for bitcoin. My long term view was that we’d get an important low in the summer of 2018. I was leaning for late July to September. The low in June is perfectly acceptable for my timing studies, so at this point, the probability of that $5700 is the low is now higher than the bear case, but its far from a guarantee.
I’ve been a bear since we broke down at $13000 in January, the first time I ever took a short position on bitcoin. I sold every single rally. But this one is different and I’m not so quick to short up here for a swing trade. I am now neutral with a small long position but looking for bullish confirmation to take a large long position.
The Bearish Case First (Red)
My biggest concern is that markets tend to follow a similar pattern after they make a parabola. They end up with 3-4 thrusts down and sometimes a much longer slower move to new lows. They usually result in a very long sideways range, tight bollinger bands, where smart money is accumulating. It's more common to form a high volume capitulation low, but doesn’t have to.
This was a 3 year bull market that ended parabolic, It would be common to see a bear market last 12-20 months. We are now on month 8, so if this bear market is over, it would be historically short. That might be OK because bitcoin tends to just move faster than traditional assets.. Every bear market is different, so it doesn't "have" to follow historic tendencies. But it's still something keeps me cautious.
The second problem is that bull market rallies in bear markets are INCREDIBLY convincing. I’ve been fooled many times in the past. I got caught up in the silver 2012 bull trap. And as you can see in this chart, it shares many similarities.
The other problem is that this move is at the .618 fib or the entire move down from $10k to $5700 so if this keeps getting sold here, that means that bots are still on sell mode and if retail can’t overpower them, they will want to take it to new lows.
The Bullish Case
I love seeing flagpole flags. It’s strong bullish price action. Different from the last rally, we see what I call “stacking.” You get consistent green candles on 5, 15 minute charts that last for hours. Instead of one big $200 candle then a sell off (the price action we saw the last few months). The reason I like stacking is that it's indicative in big money participation where spikes up tend to be more FOMO retail or one person making a huge order and setting.
And we are seeing really good volume. Enough to know that big money is participating.
So if we get over the .618, clear the 200 SMA then, it tells us two things. 1. That there aren’t enough bots selling the fib to push us down. 2. That 200 SMA can become support and there are bots that will turn bullish, protecting the 200 SMA as support.
The green bar pattern shows a move through resistance, a pullback for a DCL then a break above $10k. That $10k is the final confirmation for me. By that time we’d have a strong weekly chart and this would represent a swing and also a different outcome than the 2011 silver chart that never got past its swing high. We’d also be getting close to a right translated weekly cycle.
So neutral, small long, 60% chance of bullish outcome, looking for move up past 200 SMA, pullback to test SMA for a long term long position.
I’ve been a bear since we broke down at $13000 in January, the first time I ever took a short position on bitcoin. I sold every single rally. But this one is different and I’m not so quick to short up here for a swing trade. I am now neutral with a small long position but looking for bullish confirmation to take a large long position.
The Bearish Case First (Red)
My biggest concern is that markets tend to follow a similar pattern after they make a parabola. They end up with 3-4 thrusts down and sometimes a much longer slower move to new lows. They usually result in a very long sideways range, tight bollinger bands, where smart money is accumulating. It's more common to form a high volume capitulation low, but doesn’t have to.
This was a 3 year bull market that ended parabolic, It would be common to see a bear market last 12-20 months. We are now on month 8, so if this bear market is over, it would be historically short. That might be OK because bitcoin tends to just move faster than traditional assets.. Every bear market is different, so it doesn't "have" to follow historic tendencies. But it's still something keeps me cautious.
The second problem is that bull market rallies in bear markets are INCREDIBLY convincing. I’ve been fooled many times in the past. I got caught up in the silver 2012 bull trap. And as you can see in this chart, it shares many similarities.
The other problem is that this move is at the .618 fib or the entire move down from $10k to $5700 so if this keeps getting sold here, that means that bots are still on sell mode and if retail can’t overpower them, they will want to take it to new lows.
The Bullish Case
I love seeing flagpole flags. It’s strong bullish price action. Different from the last rally, we see what I call “stacking.” You get consistent green candles on 5, 15 minute charts that last for hours. Instead of one big $200 candle then a sell off (the price action we saw the last few months). The reason I like stacking is that it's indicative in big money participation where spikes up tend to be more FOMO retail or one person making a huge order and setting.
And we are seeing really good volume. Enough to know that big money is participating.
So if we get over the .618, clear the 200 SMA then, it tells us two things. 1. That there aren’t enough bots selling the fib to push us down. 2. That 200 SMA can become support and there are bots that will turn bullish, protecting the 200 SMA as support.
The green bar pattern shows a move through resistance, a pullback for a DCL then a break above $10k. That $10k is the final confirmation for me. By that time we’d have a strong weekly chart and this would represent a swing and also a different outcome than the 2011 silver chart that never got past its swing high. We’d also be getting close to a right translated weekly cycle.
So neutral, small long, 60% chance of bullish outcome, looking for move up past 200 SMA, pullback to test SMA for a long term long position.
Comment:
I'm looking to go long at that green supply zone. Always a chance I don't get it but that would at least be a decent trade. I'll manage risk under that zone and then if we get to $7000 I would add. If we close under $7000 I would get out of that trade, though I would not go short. Only a violent series of red candles would have me short a breakdown of $6800.
I believe we made a half cycle pivot high and the next move is $7400 to $10000 if this market has taken a bullish turn. I'm at least going to trade that way for now. If we have a hard time getting past $8300 then I will start getting nervous as a test of the 200 and failure would be a disaster.
I'm looking to go long at that green supply zone. Always a chance I don't get it but that would at least be a decent trade. I'll manage risk under that zone and then if we get to $7000 I would add. If we close under $7000 I would get out of that trade, though I would not go short. Only a violent series of red candles would have me short a breakdown of $6800.
I believe we made a half cycle pivot high and the next move is $7400 to $10000 if this market has taken a bullish turn. I'm at least going to trade that way for now. If we have a hard time getting past $8300 then I will start getting nervous as a test of the 200 and failure would be a disaster.
Comment:
I took profits on my short and started building a long but I'm not going to hold it if we don't turn here very soon. I'm still very uncertain of what will happen. If you look at my original post, that red bar pattern was made at that 200 EMA, but its playing out the same way, except at the 200 SMA. A lot of sellers at $8300 just continued to build up shorts. Was that big money distribution? Was this last $1000 just retail selling alts?
We are trapped between the 100 and 200 EMA and thats OK for a pullback but we don't want this pullback to stay down here too long. It's been 8 days since we made the highs. The longer we stay down here before a bullish move, the more concerned I get.
If we make our way to $7700-$7800, I may take most of my long off the table if we start to struggle there or get some big selling. Especially if we close today under $7700. That would be an ideal spot for shorts to reload. In other words, I'm going to trade this very cautiously for now.
I took profits on my short and started building a long but I'm not going to hold it if we don't turn here very soon. I'm still very uncertain of what will happen. If you look at my original post, that red bar pattern was made at that 200 EMA, but its playing out the same way, except at the 200 SMA. A lot of sellers at $8300 just continued to build up shorts. Was that big money distribution? Was this last $1000 just retail selling alts?
We are trapped between the 100 and 200 EMA and thats OK for a pullback but we don't want this pullback to stay down here too long. It's been 8 days since we made the highs. The longer we stay down here before a bullish move, the more concerned I get.
If we make our way to $7700-$7800, I may take most of my long off the table if we start to struggle there or get some big selling. Especially if we close today under $7700. That would be an ideal spot for shorts to reload. In other words, I'm going to trade this very cautiously for now.
Comment:
Again, this is my big concern. This plays out much more closely to my original expectations since this bear market started and would generally validate my prediction of a major low coming July to September.
If this rally was simple a relief balance for big money to get short and use the ETF news to fuel FOMO and wait for retail to sell off alts and give big money to liquidity then this is what will happen. And it will be brutal and absolutely destroy the bulls that just loaded up. I really don't want to see this. I want to see some strong buying come in and blow past $8300 and I can hold this long position for months as we push back to $25k.
But I've seen too many times where people get overly excited and these bull rallies are so convincing but big money comes in and shorts heavy so they can get buys in at much lower prices.
At this time I just don't know if this will happen, but I certainly see more signs of it being possible.
Again, this is my big concern. This plays out much more closely to my original expectations since this bear market started and would generally validate my prediction of a major low coming July to September.
If this rally was simple a relief balance for big money to get short and use the ETF news to fuel FOMO and wait for retail to sell off alts and give big money to liquidity then this is what will happen. And it will be brutal and absolutely destroy the bulls that just loaded up. I really don't want to see this. I want to see some strong buying come in and blow past $8300 and I can hold this long position for months as we push back to $25k.
But I've seen too many times where people get overly excited and these bull rallies are so convincing but big money comes in and shorts heavy so they can get buys in at much lower prices.
At this time I just don't know if this will happen, but I certainly see more signs of it being possible.
Comment:
Bitcoin made it to my target zone. I took a long here. Not a big position. It's just the last area of defense before $6800 and seems like we need to rally a bit even if it goes down. I'm not convinced we will go bullish here. I don't like the price action so far, but I'm being patient with it.
So I will hold this long but I have stops at break even. I'll flip short if we break below $7300. I'll have to watch price action this weekend to determine my next move. If we pick up big buyers and start pumping out green candles, I will add to longs and start to build a big long position.
Still, my general disposition this entire time has been that we are in a long term bear market. And that we'd get a capitulation low. And that it would most likely come between July and September 2018. And then we'd run into a long sideways trading range for many months afterwards. So breaking lower from here would match up with my expectations for a bear market. And this will just end up being another sad bull trap and test of the 200 MA.
I really hope this doesn't happen. I'd rather stay long and add to my long term holdings. 'd love to see some big buyers step in and we can all watch bitcoin go to $20k. But gut feeling is that it won't happen.
I think the next week will be critical for traders to figure out which side of the fence they will be on as I think we are going to trend aggressively one direction or the other.
Bitcoin made it to my target zone. I took a long here. Not a big position. It's just the last area of defense before $6800 and seems like we need to rally a bit even if it goes down. I'm not convinced we will go bullish here. I don't like the price action so far, but I'm being patient with it.
So I will hold this long but I have stops at break even. I'll flip short if we break below $7300. I'll have to watch price action this weekend to determine my next move. If we pick up big buyers and start pumping out green candles, I will add to longs and start to build a big long position.
Still, my general disposition this entire time has been that we are in a long term bear market. And that we'd get a capitulation low. And that it would most likely come between July and September 2018. And then we'd run into a long sideways trading range for many months afterwards. So breaking lower from here would match up with my expectations for a bear market. And this will just end up being another sad bull trap and test of the 200 MA.
I really hope this doesn't happen. I'd rather stay long and add to my long term holdings. 'd love to see some big buyers step in and we can all watch bitcoin go to $20k. But gut feeling is that it won't happen.
I think the next week will be critical for traders to figure out which side of the fence they will be on as I think we are going to trend aggressively one direction or the other.
Comment:
We are now under $7k. A strong bullish market would not have this brutal of a down move shaving $1500 from the top while alt coins get destroyed.
$6800 will likely hold for a bit as it should be the strongest support.
The big problem I see is that we have had weak buying at the major fib zones. That means that that a very low % of bots are in buy mode. If bots don't buy the fibs that means they are likely in sell mode from the 618 retrace of the move down from $10k and those bots will overpower retail traders.
The only hope is that many of them are set up to buy at the $6800 618 of the move up, but I don't think that is like because you would have seen some rallies at the 328 and 50.
$6800 will likely hold for a bit as it should be the strongest support.
The big problem I see is that we have had weak buying at the major fib zones. That means that that a very low % of bots are in buy mode. If bots don't buy the fibs that means they are likely in sell mode from the 618 retrace of the move down from $10k and those bots will overpower retail traders.
The only hope is that many of them are set up to buy at the $6800 618 of the move up, but I don't think that is like because you would have seen some rallies at the 328 and 50.
Comment:
This move does severed damage to bitcoin. Unless it can quickly recover and close above that green line, I think we'll see a major move down. At this point, I need to see a few more closes to be sure, but the probability of new lows becomes high.
As my readers know. I was short before this trap and explained that this move up did not fit my expectations, but I do not argue with the market and after breaking serious resistance, I was looking for a potential area to go long. But I never got confirmation, which is why I always look for a weekly swing low and it is why I don't buy a soft rounded bottom.
I was looking to take a bigger short at $7300 but we never got it so I'm in a small position and will add a little on bounces. It's a bit too oversold now to go heavy but that doesn't mean it can't go down extremely fast. A 4 hour close above that green line and I'll get out of the short trade.
This move does severed damage to bitcoin. Unless it can quickly recover and close above that green line, I think we'll see a major move down. At this point, I need to see a few more closes to be sure, but the probability of new lows becomes high.
As my readers know. I was short before this trap and explained that this move up did not fit my expectations, but I do not argue with the market and after breaking serious resistance, I was looking for a potential area to go long. But I never got confirmation, which is why I always look for a weekly swing low and it is why I don't buy a soft rounded bottom.
I was looking to take a bigger short at $7300 but we never got it so I'm in a small position and will add a little on bounces. It's a bit too oversold now to go heavy but that doesn't mean it can't go down extremely fast. A 4 hour close above that green line and I'll get out of the short trade.
I took a short but I have a tight stop at $8200 as I won't sit in the range. I'll add if we break $8050 and look for $7400-$7800.
I also have a bracket order buy at $8320 because breaking that level at this point would most likely give us $8600 minimum.
This pattern usually breaks bearish. It's taking too long to break up for an IHS and when it had a chance to break up we lost volume, so thats the main reason I took a short, but we got wicks on both sides.
For now this will be a short term trade unless I see some big red bearish candles that start breaking support. The volume sells at $8300 might just big big money wanting to drop price to buy back lower, which would healthy as I hate markets that never pull back. Smart money doesn't fomo.
If it reverses, I'll get out and look to buy the breakout.