Bitcoin: Sell Signal To 17K.

18 Sep 2022

Bitcoin rejects the 22 to 25K resistance area as a result of the CPI report over the previous week. A momentum continuation sell signal is developing with just a couple of days until the next FOMC meeting. While the outcome of the press conference can swing the market either way (random), the broader price structure continues to point to a test of the 17K support or lower low.

Learn to trust price because it is a reflection of all the known information in the world. "Price" includes things like price structure (trends), price levels, price patterns, and it helps to evaluate these elements in light of the economic context. Many new traders that I talk to focus on price in isolation, which does not account for the probabilities implied by not so obvious factors like interest rates.

Current price action continues to favor bearish momentum. The lower high established at the 22K AREA is now in play while price consolidates. While this might seem like a "higher low" to buy into, both momentum and the environment STILL favor a test of lower prices, not a break of resistance.

What about the short squeeze off of 18K? Isn't that bullish? While the move was notable in terms of momentum, that bullish momentum was canceled out by the swift bearish move following the CPI number.

A NEW swing trade sell signal (momentum continuation) will be in effect upon the break of 19,500. Risk can be defined by the 22,500 level. Which means in order to justify this risk, price will have to push into the 16Ks. Can a tighter stop be used? Yes, around the 21,250 area, but your chance of getting stopped out increases. IF a short is taken, and the next candle produces a conflicting signal, then that is where your risk should be mitigated, meaning you take the small loss or gain. So you can start out with wide risk, and adjust it as the market provides new information (this is called listening to the market and NOT hoping).

Opinions and complexity will not help you in this game. Bitcoin is correlated to the S&P and the S&P is significantly affected by interest rates. The outcome of the FOMC press conference is what can move the market dramatically one way or the other if there are any surprises.

Markets are highly random and new information can change things very quickly. Charts can help us gauge probabilities and help us manage risk, but they do NOT provide ANY specific advantage over the market. You have to learn how to recognize price in light of context. Context is not something you will find on your charts. These are pieces of relevant information that weigh on probabilities (like interest rates).

Thank you for considering my analysis and perspective. I hope you find it helpful.