BTC Long (short term) - longing the bull trap
Updated
Still overall bearish until 3-5k, but am short-term bullish since conclusion of falling wedge from 11.7k to 6.5k and also looking out for a bull trap at this late phase of the bear. The flip of the ATR indicator and the close proximity of the log down trendline (light greenish blue line from 20k on down) gives two scenarios (A&B) that I think are most likely:
Bull scenario
(A) rising wedge is a bearish pattern, and we've been (roughly) forming a small one since the uptrend-support-turned-resistance (red uptrend line) which we first touched on apr 13. It should complete right at the long term down trendline (greenish one again) around 8.5k (haven't tested it since March 3rd, expect heavy resistance), retrace to .5 fib around 7.5k, then move up back up towards greenish trendline, big green candle on breakthrough that grows to 11.1 as hope and optimism return. Close longs and take profits around 11.1k, switch back to short until 5k (heavy resistance to watch at 9.2k, might close longs there based on momentum leading up to it).
(B) since BTC rarely has the same reaction twice in a row, it's highly likely we respond differently to this resistance than we did on the previous falling wedge from 11.7k to 6.5k that we encountered on April 9th. Meaning once we get there, we break through to the upside with momentum with no re-test of support.
Bear scenario
(C) resistance at 8.5k was the local top and we're now headed back down. evidence- down trend still valid (shorting safer than longing), shorts now cleared out from ATH, big green candle was mostly just momentum from massive short squeeze. Evidence to the contrary- 2014 btc pattern had a bull trap at roughly this phase of the cycle, and we're right up against that infamous down trendline, breaking it would bring in a flood of optimism and leveraged longs. Huge profit opportunity for MM, and would help facilitate the necessary emotions to carry us towards the final capitulation.
Strategy- keep longs from 6.5k open, pull up stops to .618 fib at 7250. Track rising wedge for any violations to adjust strategy. Leverage longs with tight stops at .5 fib 7.5k in case of re-test (highly likely).
Sentiment- I find that using the fib to measure any uptrend gives a great sentiment indicator. .236-super bullish, lots of hope and optimism, .382-healthier, most common for alt/btc bull runs, .5 usually happens if we've only had small corrections in an uptrend for an extended period of time, .5 of longer move up wipes late entries to clear stops and reduces leverage before trend continuation (very healthy for trend), .618 is more rare in crypto, indicates a slower moving trend. Anything below .618 means trend is invalid. Also, ATR flipped to highly bullish
Since we left the rising wedge at 6.9k we've only had .236 fib retracements, both representing the high level of momentum from so many liquidated shorts and that we're overdue for a .5 to clear latecomers. This has brought out the permabulls we haven't heard from in months. Might want to put stops right under .618 in case MM does a wick to clear stops below .5 fib.
Bull scenario
(A) rising wedge is a bearish pattern, and we've been (roughly) forming a small one since the uptrend-support-turned-resistance (red uptrend line) which we first touched on apr 13. It should complete right at the long term down trendline (greenish one again) around 8.5k (haven't tested it since March 3rd, expect heavy resistance), retrace to .5 fib around 7.5k, then move up back up towards greenish trendline, big green candle on breakthrough that grows to 11.1 as hope and optimism return. Close longs and take profits around 11.1k, switch back to short until 5k (heavy resistance to watch at 9.2k, might close longs there based on momentum leading up to it).
(B) since BTC rarely has the same reaction twice in a row, it's highly likely we respond differently to this resistance than we did on the previous falling wedge from 11.7k to 6.5k that we encountered on April 9th. Meaning once we get there, we break through to the upside with momentum with no re-test of support.
Bear scenario
(C) resistance at 8.5k was the local top and we're now headed back down. evidence- down trend still valid (shorting safer than longing), shorts now cleared out from ATH, big green candle was mostly just momentum from massive short squeeze. Evidence to the contrary- 2014 btc pattern had a bull trap at roughly this phase of the cycle, and we're right up against that infamous down trendline, breaking it would bring in a flood of optimism and leveraged longs. Huge profit opportunity for MM, and would help facilitate the necessary emotions to carry us towards the final capitulation.
Strategy- keep longs from 6.5k open, pull up stops to .618 fib at 7250. Track rising wedge for any violations to adjust strategy. Leverage longs with tight stops at .5 fib 7.5k in case of re-test (highly likely).
Sentiment- I find that using the fib to measure any uptrend gives a great sentiment indicator. .236-super bullish, lots of hope and optimism, .382-healthier, most common for alt/btc bull runs, .5 usually happens if we've only had small corrections in an uptrend for an extended period of time, .5 of longer move up wipes late entries to clear stops and reduces leverage before trend continuation (very healthy for trend), .618 is more rare in crypto, indicates a slower moving trend. Anything below .618 means trend is invalid. Also, ATR flipped to highly bullish
Since we left the rising wedge at 6.9k we've only had .236 fib retracements, both representing the high level of momentum from so many liquidated shorts and that we're overdue for a .5 to clear latecomers. This has brought out the permabulls we haven't heard from in months. Might want to put stops right under .618 in case MM does a wick to clear stops below .5 fib.
Note
last paragraph should start with 'Since we left the falling wedge,' not rising wedge. oopsTrade active
The bearish divergence didn't seem to have any effect. Shorts were stopped out so I re-entered longs quickly. We've reached the first Order Block without any major corrections with BTC looking better than expected. A couple things to consider- the major falling wedge is a trend reversal pattern, and the end of it forms an Eve bottom with the previous run to 6k being the Adam part. An Adam and Eve is also a trend reversal pattern, which is validated if the price reaches the previous level at the midpoint between the two, which is 11.7k.
So now we're in a bit of a quandary; we have two bullish trend reversal patterns showing on the long time frame which could mean this bear is actually over. Ironically they meet at the same point- the closing target for the falling wedge is the same as the validation target for the Adam and Eve. That's still a long ways off but it's highly encouraging for the market overall and it will be interesting to see what happens at that price point.
Staying long.
Note
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