eyupium
Long

Falling wedge coming to the rescue? BTC

BITMEX:XBTUSD   Bitcoin / US Dollar Perpetual Inverse Swap Contract
The price has been steadily dropping these past days, no correction upwards, no signs of a bounce or any kinds of reversal.
Very similar to capitulation (it could very well be, but I don't think we're there yet, unless this drops straight to 3000-2800 from here).

What we aim to catch here is a correction to the upside. Not a trend reversal, just a retracement/correction, which will likely be followed by another drop afterwards, but let's take it one step at a time.

After large drops like we've seen recently, it is highly probable there will be a correction in the opposite direction.
It's just a matter of where it will start and how strong/weak the correction will end up being.

It's difficult to catch it (unless you like catching falling knives) when the market is so bearish , and the panic is everywhere, people looking for even lower prices (which we are still probably going to get, but they're more likely to happen after the correction to the uspide is done).

Why is it worth trying to catch this instead of just shorting? Because it has the potential to easily turn into a 25-30% move from here (while the risk is 2-5%).

It's a lot easier, especially as someone who shares public analysis, to call for more drops, lower prices, and simply go with the overall trend.

Trying to find a counter-trend setup is a lot more challenging and difficult task, which some novice traders may not realize or appreciate.

The best approach in these cases is to avoid using high leverage (or any leverage), and trade using carefully laddered spot buys.
That way you're safe from being stopped out by a wick, but still manage your risk properly and don't go "all in" (which would be equal to gambling).

The analysis:
Falling wedge , bullish pattern , indicating (temporary) exhaustion of sellers.
Bullish divergence on RSI , OBV and MACD (from 1h to 4h timeframes).
Price consolidating at a minor support level (4210-4000).

Negative sides of the setup:
  • This support level is not as strong as 4800-4500 was, and the next strong support and a buy zone lies at 3586-3000 area, which is why the stop loss is a must just below 4000, unless you size your position in a way that lets you risk less which would allow you to hold and buy more if it dips to 3586-3000 area. Not recommended, but everyone has their trading style, and if it works for you, then stick with it.
  • The wick below the wedge support line would normally render this wedge invalid. The reason why I'm still considering it as a wedge is due to the volume profile (lower volume while the price drops with less and less conviction), shortening of the thrust to the downside, and because that wick does not exist on other exchanges, and neither on altcoin/usd pairs (ETH has this same setup with a valid wedge , no wicks). It makes the wedge questionable.

In any case, I'd limit max risk here to 2% (total capital loss in case you get stopped out), or 5% for really agressive traders. Not more than that.
There will be plenty of time to add more to your position once the price confirms the bounce, and shows some strength (so far, zero signs of strength).

In case the price manages to break out of the wedge , then
Targets are:
1. 4649
2. 4825
3. 5100
4. 5339


Best approach here is to either way for a breakout of the wedge , or alternatively wait for the price to come down to the buy zone (the lower the better), and if we see the support holds, enter there with a stop loss just under 4000 (which makes your risk tiny compared to the potential reward).

Risk/Reward = 1:5+

If this setup fails, then this would turn into capitulation and next zone to look for signs of a bounce/reversal will be 3586-3000. That will be a higher probability reversal zone, but I'll post a new analysis if we see the price down there in this move, without retracing upwards first.
Comment: Still inside the wedge. No breakout yet.
If the wedge is going to play out, then we have to see an increased volume breakout within 2-3 days, sometimes by Monday/Tuesday at the latest.

Comment: If the daily candle closes like this, there will likely be more downside.

Next area to look for a bounce will be 3600-3500, and if that doesn't hold, then 3200-2900 as a lot more reliable support level.
These moves won't happen in one day, but as long as the price is below 4000, it is a lot more likely to test at least 3600-3500 area.

Comment: 3500 area has been tested as expected, since there was no support in between.

We have seen an interesting candle today which may indicate the bulls had enough beating and they want to breathe freely for a few days/weeks. This still means nothing unless we see at least one of the previous resistances broken and confirmed as support.

This would be a very constructive move to see with this kind of price action.

Comment: No breakout above the previous support turned resistance.
This seems to have only been a test of that and now confirmed as a resistance zone.

Next target would be 3600, and if that doesn't hold (unlikely to hold), then 3066-2900 zone is next major support.
Comment:
Comment: First target 3600 reached.

We might see a small dead-cat bounce from here, but the chances to continue towards the next target are relatively high.

Might be easier to follow this on the separate chart below.

I've been documenting the fall for a long time. This is called the The Theory Of Everything. The chart explains it all
Reply
Ignore the wedge. Accumulation is almost over. If you watched the GDAX and Kraken trades you should know.
Reply
eyupium hirounsung
@hirounsung, Not sure if I understand what you mean. Are you calling THE bottom here?
Reply
hirounsung eyupium
@eyupium, yeah. You might feel better if you look at how much USDC and TUSD was printed in the last week.
Reply
Karolis99 hirounsung
@hirounsung, Can i have more info please
Reply
There's a buy point at 3860 too, there is a risk of a stop hunt to that level. Good trade too, if i wanted to sell lots of btc, I'd install a bulltrap about now.
Reply
@cycler, Possible, yes. But if I see this break 4000, I'd wait for it safely at 3586 (3650-3500 area). 3860 is a very minor support, much weaker than 4200-4000 area, so I don't expect that to hold that kind of drop.

But let's see how it plays out. Stop hunts are always possible, as we've seen.
Reply
cycler eyupium
@eyupium, always good, my main buyzone has been $3100/3500 under the most bullish scenarios since I started publishing charts, it would be better for the market to not break $4000 so everyone calls the bottom during the bulltrap, they will cite the traded volume as the reason, but that is not bottom volume but pre bulltrap volume, anyway as always its just ideas from the past, if I ever learn to trade backwards from the future you'll be one of the first to hear about it. I put my bids above $4000 for now, but as always I can't trade on weekends very easily so hopefully nothing happens for a bit. here is why there is no real "safe trade" till 3500, due to the weak support, low volume, and ease of stop hunting, so you could be stopped out of 3-4 trades before being successful, it will make many people lose confidence in their trade, then boom oops we pumped it.
Reply
cycler cycler
@cycler, last point, I accidentally wrote with certainty words, i was just in a rush and didn't check myself. its one of my pet hates.
Reply
cycler eyupium
@eyupium, nice sniping again, how do you do that?
Reply
Home Stock Screener Forex Screener Crypto Screener Economic Calendar How It Works Chart Features Pricing House Rules Moderators Website & Broker Solutions Widgets Charting Solutions Get Help Feature Request Blog & News FAQ Wiki Twitter
Profile Profile Settings Account and Billing Get Help Ideas Published Followers Following Private Messages Chat Sign Out