BTCUSD: Momentum Reversal In Play.

31 Des 2017

BTCUSD update: Within the triple bottom formation that is now established in this market, there is a particular sequence of price action that often leads to a momentum reversal. The confirmation of this infrequent pattern is a retest and higher low of the 12350 support area.

Price has broken the 13500 resistance level and if it continues at this rate, will most likely close above. My limit order that I placed yesterday at 13150 (Coinbase) was filled quickly and is now in my favor (this is a long term trade as explained in my previous report. No stops, no targets, no margin). Even though price action is slightly bullish at the moment, it is still not out of the clear.

Is this the beginning of the next leg up? The 13520 level is the .382 of the recent bearish structure. Often, when this level is taken out, it signals a change in momentum which in this case is bullish. The confirmation comes in the form of a higher low formation which would be most attractive around the 12483 to 12139 minor support zone which is the .618 area relevant to this current bullish swing.

If price chooses to retest the minor support, this would be an attractive area to add to long term positions, or initiate new ones. Since this level would also confirm a short term pattern reversal, it will serve as an attractive area for a swing trade long as well. Risk can be defined by 11600 low, or the low of the current structure at the time of the retest.

What about lower prices? Like I always write: anything is possible because things change fast in these markets. IF for whatever reason, price falls through 12139 and retests 11600, it would then be much more likely to revisit the 10700 or lower. IF the market decides to retest these levels, 9683 would not be unreasonable since it is the lower boundary of the reversal zone (projection measured from 10700 low).

What makes that bearish scenario less likely is the price action that is occurring now. The next retrace, whether it is shallow (way above 12483) or into the minor support will provide a much clearer view of what the market's intentions are. What is unfolding now is certainly bullish, but that does not mean the market will return to the vertical exaggeration that we saw 2 weeks ago. A change in momentum along with supportive structure can take this market back up to the 16350 to 17876 resistance area which is the short term target for any swing trades established near or below current levels.

In summary, there are NOW signs in place that short term price momentum is shifting back to bullish. As you can see, it took a couple of days, not hours or minutes. This is what carries weight on a short term trading basis and why so much patience is required. The next retrace will more than likely offer entry opportunities that will have clearly defined risk. IF the price action makes sense I will not only add to my position trade, but also put on a swing trade with a short term target. The key is to watch for reversal patterns near or within the minor support zone. Taking a position sooner is up to your trading plan and risk tolerance, because it is still possible for price to attempt a retest of the lows, just a lower probability at this point. Either way stay flexible and listen to the market, not your own feelings or opinions.

Comments and questions welcome.

Also I would like to wish the Tradingview community a Happy, Healthy and Prosperous New Year! Thank you all for your support and encouragement. Let's learn from our mistakes and hit the ground running, and start the new year strong.