Bitcoin - Markets are the Perfect Transfer Mechanism of Wealth
Taking out the 8400 level confirms a correctional sequence, but the signs of a potential retrace were already abound. There was no guarantee we pulled back after hitting the lower area of our initial wave 1 target, but there was a lot of evidence that increased the probability of a potential retrace. This made any long trades at these levels higher risk.
For Transparency we mentioned to our members that there was a long signal setup which was aggressive and one we personally choose to not participate in. The reason we did not participate is it did not meet our conservative criteria for trading. Regardless it was a long signal for those with a more risk tolerance, we are just more conservative then most. These types of trades also require baby sitting, and as a father of four I do not like to baby sit.
There were several clues that Bitcoin was running out of gas here, starting with all the "analysts" that were only a month or so ago calling for 3500, flipping and making calls of 10k and higher. This was one sign to simply step aside as sentiment was running hot and though the market could have pushed higher, the herd is more often than not, on the wrong side of the trade.
The less obvious sign was the ascending wedge which formed on the daily and is often a sign of late participants buying any dip, only to be met by sellers who were in from better prices. Wedges are a battle between those buying the dip, and those selling the blip. The order flow from this type of market battle can result in numerous patterns like the wedge seen above.
Again it was not the pattern that was important, but the price action that resulted in the formation of. Had it taken out the previous high, we could have moved higher and stopped out shorts. This made it a valid long signal and there was no guarantee that it played out to the downside; However, the position, the order flow, were all showing signs that we were nearing a top.
Another clue was the bullish fake-out that resulted in the engulfing candle where a breakout was quickly met with buyers, that pushed through stops creating the outside bar. Then there was the 8400 support level. As I mentioned yesterday in my article, taking out the 8400 level added weight to an interim top and completion of wave 1 in the broader cycle.
Fortunately we had been trimming out of our positions for weeks, reducing our risk and increasing our cash position to 20-30% prior to this pullback. Since the trend was still bullish and there were no major breaks of the trend, we did not want to be completely out of the market. However since we were near an important resistance area, we wanted to free up some cash in the event we did pullback. In simple terms we were not concerned about being right or wrong, we were concerned about being prepared.
Often investors try and time markets with ALL their holdings, only to see the market move higher and they are left at the "L" waiting for the next train. This is where balance between cash and risk is key. Regardless of how the market played out we were in a position to take advantage of it. Had it moved higher we were getting 70-80% of the move, pulled back like it did, we have cash to buy at better prices.
Now these levels are preliminary, and because Bitcoin has completed numerous fractal cycles, the correction is likely to take time to evolve. This assumes there is no news like the announcement of an ETF or one of the main stream exchanges going live with Bitcoin trading. These are fundamental changes that can put some steam in the turbine and we can just throw technicals out the window. But baring a news event, the 7400 level is initial support, and as shallow as it may seem, is enough for the end of wave 2, in the broader picture.
Personally I think the 7k-7100 area is a good area for a reversal, though technically we can pullback into the low to mid 6k's. Anything under 6k is pocket aces in my book and I will be adding fresh money. Why might you ask? Well its simple, lets take a look at the broader picture.
This is our road map or atlas. It is not going to be a straight line, as there are going to be many dips and blips along the way, but in the end I am positioning for the broader move to 24k. Regardless if you do not have a broader map of your targets, you are likely running with the herd from pasture to pasture hoping you get it right. These are not improbable targets, and in my opinion, the broader swing could move as high as 45k.
With these levels in mind I am looking to position trade and accumulate inventory for a broader move regardless of where the final price may fall. However playing these types of moves requires much patience and more discipline, which few have.
"The stock market is a device for transferring money from the impatient to the patient" - Warren Buffett
There is nothing to do here for short and long term investors but wait. Markets are comprised of various trading and investing strategies. It is also comprised of various participants some of whom are patient and others that have the attention span of a fly. Some that react and others that wait to act. This becomes the patterns we see on the chart, like those that were FOMO'ing out just a few days ago, and are now having buyer's remorse.
These are many of the same participants that did not have the courage to step up and buy at lower prices. We mentioned this for months, that those that waited last year for 3500-4500, when trading above 6k, would get cold feet even if it got there. This as we mentioned brought about calls for 1500-2500 so weak hands ignored the broader picture, and never stepped in.
When it broke 4500, they thought, ohhhh it will retest the low, when it hit 5500 they thought, I'll get another chance at 4500, and it was not until, well you know 7500 plus that they stepped in. These are the same participants that will get nervous over the next couple weeks, IF we start hitting the 6k, and all the "experts" start calling for the apocalypse again.
This is why we always have a chart of our broader targets front and center. It gives us courage to step into the lows, and not to worry if we buy and the market pulls back. This has been our strategy since last year and our average cost of Bitcoin, since May of last year is $3993. Nobody is perfect or has a crystal ball it is all about patience and the guts to step in, even when lower levels are possible. It is about being prepared for either scenario and not getting cold feet when prices are favorable for your broader targets.
Thankfully we trimmed off some risk near the high putting us in a position to receive some of the transfer of wealth from those with no patience. Sure many will try and trade here, and some will be successful, but most not so much. This is a time to let the market play out, as it is not about being right or wrong, it is about being patient and sticking to your plan!
For Transparency we mentioned to our members that there was a long signal setup which was aggressive and one we personally choose to not participate in. The reason we did not participate is it did not meet our conservative criteria for trading. Regardless it was a long signal for those with a more risk tolerance, we are just more conservative then most. These types of trades also require baby sitting, and as a father of four I do not like to baby sit.
There were several clues that Bitcoin was running out of gas here, starting with all the "analysts" that were only a month or so ago calling for 3500, flipping and making calls of 10k and higher. This was one sign to simply step aside as sentiment was running hot and though the market could have pushed higher, the herd is more often than not, on the wrong side of the trade.
The less obvious sign was the ascending wedge which formed on the daily and is often a sign of late participants buying any dip, only to be met by sellers who were in from better prices. Wedges are a battle between those buying the dip, and those selling the blip. The order flow from this type of market battle can result in numerous patterns like the wedge seen above.
Again it was not the pattern that was important, but the price action that resulted in the formation of. Had it taken out the previous high, we could have moved higher and stopped out shorts. This made it a valid long signal and there was no guarantee that it played out to the downside; However, the position, the order flow, were all showing signs that we were nearing a top.
Another clue was the bullish fake-out that resulted in the engulfing candle where a breakout was quickly met with buyers, that pushed through stops creating the outside bar. Then there was the 8400 support level. As I mentioned yesterday in my article, taking out the 8400 level added weight to an interim top and completion of wave 1 in the broader cycle.
Fortunately we had been trimming out of our positions for weeks, reducing our risk and increasing our cash position to 20-30% prior to this pullback. Since the trend was still bullish and there were no major breaks of the trend, we did not want to be completely out of the market. However since we were near an important resistance area, we wanted to free up some cash in the event we did pullback. In simple terms we were not concerned about being right or wrong, we were concerned about being prepared.
Often investors try and time markets with ALL their holdings, only to see the market move higher and they are left at the "L" waiting for the next train. This is where balance between cash and risk is key. Regardless of how the market played out we were in a position to take advantage of it. Had it moved higher we were getting 70-80% of the move, pulled back like it did, we have cash to buy at better prices.
Now these levels are preliminary, and because Bitcoin has completed numerous fractal cycles, the correction is likely to take time to evolve. This assumes there is no news like the announcement of an ETF or one of the main stream exchanges going live with Bitcoin trading. These are fundamental changes that can put some steam in the turbine and we can just throw technicals out the window. But baring a news event, the 7400 level is initial support, and as shallow as it may seem, is enough for the end of wave 2, in the broader picture.
Personally I think the 7k-7100 area is a good area for a reversal, though technically we can pullback into the low to mid 6k's. Anything under 6k is pocket aces in my book and I will be adding fresh money. Why might you ask? Well its simple, lets take a look at the broader picture.
This is our road map or atlas. It is not going to be a straight line, as there are going to be many dips and blips along the way, but in the end I am positioning for the broader move to 24k. Regardless if you do not have a broader map of your targets, you are likely running with the herd from pasture to pasture hoping you get it right. These are not improbable targets, and in my opinion, the broader swing could move as high as 45k.
With these levels in mind I am looking to position trade and accumulate inventory for a broader move regardless of where the final price may fall. However playing these types of moves requires much patience and more discipline, which few have.
"The stock market is a device for transferring money from the impatient to the patient" - Warren Buffett
There is nothing to do here for short and long term investors but wait. Markets are comprised of various trading and investing strategies. It is also comprised of various participants some of whom are patient and others that have the attention span of a fly. Some that react and others that wait to act. This becomes the patterns we see on the chart, like those that were FOMO'ing out just a few days ago, and are now having buyer's remorse.
These are many of the same participants that did not have the courage to step up and buy at lower prices. We mentioned this for months, that those that waited last year for 3500-4500, when trading above 6k, would get cold feet even if it got there. This as we mentioned brought about calls for 1500-2500 so weak hands ignored the broader picture, and never stepped in.
When it broke 4500, they thought, ohhhh it will retest the low, when it hit 5500 they thought, I'll get another chance at 4500, and it was not until, well you know 7500 plus that they stepped in. These are the same participants that will get nervous over the next couple weeks, IF we start hitting the 6k, and all the "experts" start calling for the apocalypse again.
This is why we always have a chart of our broader targets front and center. It gives us courage to step into the lows, and not to worry if we buy and the market pulls back. This has been our strategy since last year and our average cost of Bitcoin, since May of last year is $3993. Nobody is perfect or has a crystal ball it is all about patience and the guts to step in, even when lower levels are possible. It is about being prepared for either scenario and not getting cold feet when prices are favorable for your broader targets.
Thankfully we trimmed off some risk near the high putting us in a position to receive some of the transfer of wealth from those with no patience. Sure many will try and trade here, and some will be successful, but most not so much. This is a time to let the market play out, as it is not about being right or wrong, it is about being patient and sticking to your plan!
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