Bitcoin - Bearish Signal But The Bull Move Was Solid
Updated
This market has been resilient but as history shows, all trends must come to an end, and Bitcoin' is no exception. One thing that many traders forget is markets continue trend to the upside over time and if your long you just close the computer and wait out the storm. There are exceptions to markets recovering but this one is still in its infancy so there is a lot of room to grow ahead. On the reverse side of the coin, (no pun intended) shorting a market that is trending long term to the upside can be devastating and losses can continue to mount. The big difference is with shorting you are playing with borrowed money and your potential loss is infinite'. When investing your losses are limited to your investment.
We have the early signs of an outside bar formation on the daily which is a bearish signal. Marc called a more aggressive Bitcoin' trade setup and nailed it. It almost immediately pulled back from the target level and with the current bar formation we likely move lower but how low?
9035 is the first level of support (minor) where we may see a bounce, but this will likely be short lived as we we look to the 8521 level as our first major level of support. We could see a bullish reversal at 8521 and a continuation move to the upside, as this market has been strong and this level, though not very deep, is deep enough to complete the 4th wave of the broader move. The more likely scenario is we test the lower support zone of 7751 and 8126 before we get a reversal signal which is where we have major support with several overlapping levels including the 0.618 retrace of the overall move. This is the ideal area to trade from. Extreme support is found at the 7487 level and a move lower than this would negate the current wave count.
As exciting as the moves were over the past two weeks, as we posted this morning, we are closing or shaving off trades and looking for a correction to re-enter the market (from a trading standpoint). This is where many have issues with trade and money management and the reason it is important to have a plan and strategy as I posted this morning on OMG and Wabi. If the market continues higher we are still long term invested and we receive the benefits of the bull move. If we do get a correction, which is more probable, we have cash on the side ready to take advantage of those FOLTA's at the bottom.
Trade and position management becomes critical as we are likely entering the 5th wave of the initial bullish move from early April.
We have the early signs of an outside bar formation on the daily which is a bearish signal. Marc called a more aggressive Bitcoin' trade setup and nailed it. It almost immediately pulled back from the target level and with the current bar formation we likely move lower but how low?
9035 is the first level of support (minor) where we may see a bounce, but this will likely be short lived as we we look to the 8521 level as our first major level of support. We could see a bullish reversal at 8521 and a continuation move to the upside, as this market has been strong and this level, though not very deep, is deep enough to complete the 4th wave of the broader move. The more likely scenario is we test the lower support zone of 7751 and 8126 before we get a reversal signal which is where we have major support with several overlapping levels including the 0.618 retrace of the overall move. This is the ideal area to trade from. Extreme support is found at the 7487 level and a move lower than this would negate the current wave count.
As exciting as the moves were over the past two weeks, as we posted this morning, we are closing or shaving off trades and looking for a correction to re-enter the market (from a trading standpoint). This is where many have issues with trade and money management and the reason it is important to have a plan and strategy as I posted this morning on OMG and Wabi. If the market continues higher we are still long term invested and we receive the benefits of the bull move. If we do get a correction, which is more probable, we have cash on the side ready to take advantage of those FOLTA's at the bottom.
Trade and position management becomes critical as we are likely entering the 5th wave of the initial bullish move from early April.
Note
On the weekly chart we have an early pin-bar formation which is right at the longer term support resistance trend. This is generally and area we pullback from before breaking through. Note
I want to clarify my short comment on how your risk is "infinite" as it appears many do not understand what "shorting" implies. First there are more ways to short bitcoin then on bitmex and other unregulated exchanges. You can short bitcoin on the CBOE CME by selling futures contracts, or by shorting calls against GBTC. These are all forms of shorting bitcoin and when I mention do not short bitcoin I am thinking of more than someone shorting on bitmex.Second the use of the word "infinite" is a term used when your risk is not defined "finite". This is a standard trading term, it is not to imply the pure mathematical sense of the number though it is possible to have an infinite loss.
If I buy bitcoin for 6k, my risk is 6k if bitcoin goes to zero. Its defined.
If I sell a 6k futures contract what is my risk? Since bitcoin could go to 12k, 24k, or 200k the risk is not defined so the term that is used is your risk is "infinite".
If I short a put contract on GBTC @ 15 and the stock goes to zero, my loss is 15/0 which is mathematically infinite!
The reason I mention this over and over is there are many new traders out there that are forming bad habits with thoughts like "you can only lose your collateral" which is not true but only for a few exchanges. As they progress to stocks, futures and forex, these bad habits and loose forms of money management will eventually end up in huge losses. They will then think back to this article and go..... "hmmmm i should have listen to goldbug".
investopedia.com/ask/answers/05/shortsaleloss.asp
Note
And just as I post, I provide a real life example of using a margin account and the supposed stop loss. This happens in very liquid markets like gold, silver, forex and stocks, do not think it can not happen to YOU!
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.