Bitcoin: 30K On The Table.
Bitcoin has taken out 35K effortlessly which was a strong possibility that I have been pointing out for WEEKS (read my previous analysis). With this major support cleared, the 30K level is the next area to anticipate significant support. In this analysis I am going to highlight other relevant levels that may be in play this week. Either way, price structure has not changed and bearish momentum is likely to continue. This information helps to shape my expectations and risk management for potential trade ideas.
If you read my previous analysis, I pointed out the 40K resistance as an area to anticipate bearish activity. Buying into a such a resistance is usually ineffective, especially in light of the bearish environment we are currently in (have you seen the S&P?). Price tested the 40K area upon the conclusion of the FOMC press conference on Wednesday. Price is now testing 34K. The levels and context should have AT LEAST prevented you from buying into such a high risk area for longs. If the opinions of others got in your way, then you need to trust price more, not people.
I also mentioned 36K would be a potential support area for a new long swing trade idea. I made it clear that I was not going to step in front of this thing at 36K because the environment does not favor longs. This is what I mean about expectations. Being more selective and WAITING for a specific confirmation helps prevent getting caught in what we can now see: an effortless break of the 35K support. This area is significant because it has been keeping this broader structure intact for some time. There was also plenty of historical buying here. Now that it is cleared, 30K is a very real possibility over the coming week. This is not an opinion, it is a possibility based on the overall structure of this chart. (Alt coins are going to follow this as well).
For the coming week here is what I am looking at: (noted by blue lines on the chart).
Support: 32,400 Resistance: 36,600 Bears are in control.
What this means:
Shorts: Since I don't short Bitcoin, there is nothing for me to do if the 36K area is tested. If a sell signal appears there, those who short may have a new opportunity to assume swing trade risk. Reasonable R:R in these situations is 1:1, meaning if you take a trade with 3K points of risk (swing trade magnitude) then a 3K profit target is within reason. Why not let the short run? While the environment and structure favor a 30K break, there can be temporary but sharp bullish moves off of such a major psychological level. It can be very hard to hold a position during such a short squeeze or even worse get short right into the bottom of it. Take your profit while you can and wait for resistance levels.
Longs: Looking for swing trade longs is okay as long as the expectations are in line with this unfavorable environment. IF a clear reversal pattern can confirm off of the 32,400 area, then a long swing trade with at least a 3K profit target is reasonable. Risk will have to be at least 3K points which would put the stop around the 29K area. Dramatic bounces are possible off of this attractive area, but I would not expect a major trend reversal any time soon.
Again there is NOTHING for me to do unless Bitcoin tests the support. I'm not trying to figure out if it will get there, I am preparing for IF it gets there.
As far as investing, there is going to be a lot of talk that we are at the bottom, etc. A lot of nonsense talk. Avoid opinions. With interest rates moving like they are, bearish pressure on speculative assets is likely to continue UNTIL at least some stability appears in the bond market. There is no stability in sight at the moment.
Back when Bitcoin was at 60K, people were asking me about investing. I told them take small bites only, NOW you know why. Also if you had stuck to a schedule of taking small bites at any price, (like once per month) a smaller portion of your capital would be invested, at better and better prices. While investing at current prices may seem much more attractive than 60K, you can't lose sight of the environment. Small bites are still warranted here because 30K or even the 20K area is very possible over the longer time horizon (UNLESS THE BONDS CHANGE). There is no need to rush into this, you are not missing anything.
Keep an open mind and do not react to information. Trust price and prepare your action in advance. Levels and price structure can help you accomplish that. Less is more in this game, especially in one where MOST of the information you consume is completely irrelevant.
Thank you for considering my analysis and perspective. I hope you find it helpful.
If you read my previous analysis, I pointed out the 40K resistance as an area to anticipate bearish activity. Buying into a such a resistance is usually ineffective, especially in light of the bearish environment we are currently in (have you seen the S&P?). Price tested the 40K area upon the conclusion of the FOMC press conference on Wednesday. Price is now testing 34K. The levels and context should have AT LEAST prevented you from buying into such a high risk area for longs. If the opinions of others got in your way, then you need to trust price more, not people.
I also mentioned 36K would be a potential support area for a new long swing trade idea. I made it clear that I was not going to step in front of this thing at 36K because the environment does not favor longs. This is what I mean about expectations. Being more selective and WAITING for a specific confirmation helps prevent getting caught in what we can now see: an effortless break of the 35K support. This area is significant because it has been keeping this broader structure intact for some time. There was also plenty of historical buying here. Now that it is cleared, 30K is a very real possibility over the coming week. This is not an opinion, it is a possibility based on the overall structure of this chart. (Alt coins are going to follow this as well).
For the coming week here is what I am looking at: (noted by blue lines on the chart).
Support: 32,400 Resistance: 36,600 Bears are in control.
What this means:
Shorts: Since I don't short Bitcoin, there is nothing for me to do if the 36K area is tested. If a sell signal appears there, those who short may have a new opportunity to assume swing trade risk. Reasonable R:R in these situations is 1:1, meaning if you take a trade with 3K points of risk (swing trade magnitude) then a 3K profit target is within reason. Why not let the short run? While the environment and structure favor a 30K break, there can be temporary but sharp bullish moves off of such a major psychological level. It can be very hard to hold a position during such a short squeeze or even worse get short right into the bottom of it. Take your profit while you can and wait for resistance levels.
Longs: Looking for swing trade longs is okay as long as the expectations are in line with this unfavorable environment. IF a clear reversal pattern can confirm off of the 32,400 area, then a long swing trade with at least a 3K profit target is reasonable. Risk will have to be at least 3K points which would put the stop around the 29K area. Dramatic bounces are possible off of this attractive area, but I would not expect a major trend reversal any time soon.
Again there is NOTHING for me to do unless Bitcoin tests the support. I'm not trying to figure out if it will get there, I am preparing for IF it gets there.
As far as investing, there is going to be a lot of talk that we are at the bottom, etc. A lot of nonsense talk. Avoid opinions. With interest rates moving like they are, bearish pressure on speculative assets is likely to continue UNTIL at least some stability appears in the bond market. There is no stability in sight at the moment.
Back when Bitcoin was at 60K, people were asking me about investing. I told them take small bites only, NOW you know why. Also if you had stuck to a schedule of taking small bites at any price, (like once per month) a smaller portion of your capital would be invested, at better and better prices. While investing at current prices may seem much more attractive than 60K, you can't lose sight of the environment. Small bites are still warranted here because 30K or even the 20K area is very possible over the longer time horizon (UNLESS THE BONDS CHANGE). There is no need to rush into this, you are not missing anything.
Keep an open mind and do not react to information. Trust price and prepare your action in advance. Levels and price structure can help you accomplish that. Less is more in this game, especially in one where MOST of the information you consume is completely irrelevant.
Thank you for considering my analysis and perspective. I hope you find it helpful.
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