BTCUSD: Possible Double Bottom Forming On Support Zone.

10 Jul 2017

BTCUSD Update: Short term bearish momentum continues but we are at a level of interest. The in bigger picture, we are still within a large consolidation. This is no surprise and may continue as a result of all the uncertainty around the BIP 148 event on 8/1, but at the moment there is a possible double bottom forming within a support zone.

Consolidating markets are very difficult to trade because of the false breakouts and lack of conviction. Any trade setups that emerge in this particular situation are good for a time horizon of a couple of days to maybe a week at most. With that being said, the 2440 to 2480 area is a significant support based on the previous upswing that began on 7/1. It is a good place to look for reversals, and there is one present at the moment, the double bottom (annotated by the swing lines in the shape of an A).

In my opinion, the conservative way to trade this is to WAIT for a price break ABOVE 2506 in order to validate that the double bottom is in place. IF that happens, then the subsequent retracement offers a low risk entry to the long side. Trying to buy at the second bottom of this type of formation is tricky and requires smart position sizing and risk management because it can fall apart very quickly. Going back above 2506 at least provides some evidence of stability for the moment.

If this market falls apart, a break below 2440 will open the way for a retest of the 2390 range low. If this market retraces up off the current support area, the next resistances (good target points) are 2571 and 2620 area. These are range resistances based on recent bearish swings and offer favorable risk/reward if a long is taken in the low 2500s or the 2490s. (2:1 or better is possible depending on how you measure your risk).

In summary, this market is presenting a possible double bottom within an area of support. This is a great example of the type of reversal pattern and support area that I like to see in order to stack probabilities in my favor. Keep in mind waiting for validation is a more conservative strategy that makes sense within this bigger picture consolidation. Also if any longs are taken, it is MORE reasonable to expect a retrace back up to retest the nearby structural resistances than it is to expect new all time highs.

Questions and comments are always welcome.