Short

BTC Short Trade Opportunity and Setup

Updated

/ / Bitcoin/BTCUSD has recently hit the resistance level of a pattern that has generally held true since mid March 24 (4 preceding resistance and support confirmations).

Furthermore, it has started a return downward move following on from a 3 day filter for confirmation of the resistance level (an example of how a 3/5 day filter is an important tool for crypto trading).

Additionally:

The RSI resistance level of 70 has been recently reached and the RSI is trending downwards - a usually statistically significant indicator
The downward return move is supported by reasonable (although not enough on it's own) volume
A 3 bar pattern (downward move, pause, further downward move for confirmation)
A rate of change approaching and trending negative
A MACD also approaching negative

It's always important to assess the risk that might prove the thesis wrong. And they are:

Today's candlestick pattern is close to a dragonfly, i.e. there might be a return upwards move imminent (although this is unlikely to constitute a beginning of a move beyond the previous high as an actual dragonfly candlestick is at the end of a downtrend)
The MACD is trending down but has not actually turned negative yet, i.e. it is a bit early to say this indicator is stating a downward trend
The ROC hasn't turned negative yet either (but is trending downwards for sure)

This all leads to the following conclusion: For those with a high enough risk appetite (and usually crypto traders are those with the highest :-)) this is a good entry point for a short trade.

Using the (admittedly early but still reasonable) trend for the past three days to determine the final take profit point of 45500 (blue arrow) by approx. 19 Nov 24, the following can be set as a guide for a trade:
Entry: Now or latest tomorrow in case today's candlestick is an indicator of a minor move upwards
SL: $70,500
TP1: $63,450 - based on the first potential moving average being a resistance (200 MA)
TP2: $60,500 - based on the previous move's consistent (and twice confirmed) low
TP3: $54,500 -based on a previous historic low (i.e. psychologically important price point) which also acts as a confirmation of support to a previous move
TP4: $45,500 - The approximate price point of an estimated downward trend
Exit date (independent of TP level): 19 Nov 24

NOTE: the 19 Nov date here is important. It is the forecasted date by which the current downward price trend would linearly reach the support level. This date would be used as a checkpoint to exit the entire trade to safeguard against the normal, usually dramatic and beyond rational calculation price gyrations of crypto.

Trade closed: stop reached

TL;DR: Can't win them all - price move, probably driven by increased money supply and expected interest rate decrase, will cause pattern failure if the return move (currently happening) does not lead to the price falling and staying below the resistance level again. This would lead to the current chart structure being invalidated and a new one to form. Best to not do any further BTC trades (unless you have sufficient risk appetite) for the next two weeks until it is known if the return move is going to fall and stay below the resistance level thereby revalidating the pattern or a new chart structure forms.

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BTC has broken through the resistance of the pattern that had held since March 2024. This is most fundamental driven through money supply increase due to decreasing central bank interest rates (not unexpected and a risk to this/any pattern structure - hence why trading should only ever be very small percentages of a larger investment fund) and a new round of QE starting from China (the G7 will surely follow) (reuters.com/world/china/china-unveils-broad-stimulus-measures-revive-economy-2024-09-24/)

From a purely technical analysis perspective, the price has broken through the trend's resistance level, and if the price's return move over the next 2/3 days does not fall below the resistance level, then price move will have cause pattern failure and a new chart structure to form. Another trade would only be advisable when more is known about the new chart structure or return move.

Note

Speculation around another Chinese $1.5 trillion fiscal aid package that will be impacting the crypto markets currently: beincrypto.com/china-plans-1-5-trillion-fiscal-package/

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