Volatility Supports a Long Entry on BTCUSDOn the 4h chart, we have become approximately rangebound by overhead compressing periods between the W 200 SMA - which is where we bounced this past December and was the main support we adhered to and retested repeatedly while forming the bottom in 2015, and the implied pivot for mean reversion on the longest overexpanded period created by the November drop.
This is a clean setup. We have a good R:R entry with a target at 4100, which should be a very difficult confluent resistance to overcome. An intermediate target would be the halfway point around 3700 which has acted as a center pivot repeatedly during the compression of the past month and a half.
The degree to which we've compressed also suggests that we have compressed enough to be able to to install a strong trend if we broke the W 200 SMA down or broke upwards past the 4000-4200 area. To the downside, there's been some contradictory targets implied by the W chart depending on exchange, with the Bitfinex chart implying that we've reached the target of the W 200 SMA but the BLX chart suggesting a somewhat higher period length is correct with a target a bit under 2000. It should be noted that we don't necessarily need to drop now to fulfill that target; after all we compressed for most of 2018 before we had our current -50% move. To the upside, the mean reversion target aligns with a retest of 6000.
Note here that with this type of approach, we typically use an indicator like a 14-period CCI rollover as our trigger for entry to help confirm that we have stabilized enough in the short run to be able to confidently enter given the condition created by the setup. At the time of this writing, the 4h 14-period CCI is hovering around -100 on the yet-to-be-closed candle after rolling up on the previous bar, so I'd say this is close to ready if not ready.
The path of least resistance is to remain rangebound and keep bouncing between pivots for possibly months longer. We are at the bottom of that range, so R:R is favorable for a long entry.
If you'd like to learn more about the indicators used to produce this chart, check out SharkCharts.live, and DadShark's Youtube channel where you can find his daily livestreams applying this methodology as well as the series of overview videos I've released for these indicators.
I am an amateur and you shouldn't take anything I say as financial advice. I'm interested in any feedback.
