GBPUSD: Price Pushing Into Key Resistance With No Bearish Signs.GBPUSD: Price is now pushing into the extreme zone which has a defined upper resistance boundary of 1.4423. Price is also sitting just above the 1.4345 high that was established back in January. The probability of a bearish reversal is high, BUT until there is confirmation, the bullish momentum can continue to drive price higher.
Keep in mind, if price is going to reject a resistance level, it usually happens fast. As long as price lingers in this area, or slowly grinds higher, that is a sign of strength. I do not buy highs, I look to sell them, but only under very specific conditions. If the market cannot produce the criteria that I am looking for when it comes to initiating a swing trade short, then I avoid completely.
Buying a breakout here is high risk in my opinion. If I am going to capitalize on the long side, I prefer to take risk at more attractive prices. In this case, I am watching the 1.4115 to 1.4054 area (.618 relative to recent bullish swing) which is a minor support. Otherwise my position is neutral which means I have no position.
Make sure to check out S.C. for updates, because if a swing trade short setup develops, that is where the details will be.
Bullishmomentum
BTCUSD: Squeeze Is Just Beginning. Waiting For A Retrace.BTCUSD update: Now you know what a short squeeze looks like. After the inside bar long trigger at 6900, price climbed dramatically and took out the 7492 level within hours. In that same move, price compromised the bearish trend line that has been intact since the beginning of this year. The swing trade that was called on S.C. reached its target for a 560 point profit.
Andrew pointed out that short interest has been at extreme highs for at least two weeks now and this is the fuel that drives the squeeze once it triggers. The herd, which is always wrong at tops and bottoms, was short at the bottom. Stop orders and margin liquidations on top of new buyers jumping in are driving price into the next resistance zone as I write this.
This is the type of price action that signals the bulls have taken control. The 7490 level was the .382 of the recent bearish swing which helped to define that bearish momentum was intact. That level was blown through the second time price tested it. The next important level was the bearish trend line in the 7800 area which was also blown through. These are the confirmations that I look for to indicate a trend reversal is in effect. What does all this mean? On pullbacks, support is more likely to hold and resistances more likely to break.
The 8091 to 8543 resistance zone (.618 of recent bearish swing) is a minor area but within it, the 8442 level is the .382 resistance relative to the broader bearish structure measured from the 11549 high. If price pushes this level, that is further confirmation that the next retrace should lead to a higher high and will serve as a high probability buying opportunity.
Where is a reasonable area to anticipate a retrace? The 7076 to 6815 minor support zone (.618 of current bullish swing). That is the area we will be looking for reversal patterns for another swing trade long.
In summary, we have been writing about bullish signs for weeks and have been maintaining long inventory as well (go back and read all the reports). Remember this market has been sitting in the largest support zone relative to the entire bullish structure up to 20K. The chances of it finding support and developing a bottom are high and now it is starting to unfold. Bottoming is a process, and this impressive squeeze is the initial move that establishes a broad double bottom. If you missed the move, there is no need to feel bad because there are always more opportunities. Keep an eye on S.C. because when we call the next swing trade, the details will be there.
Questions and comments welcome.
BTCUSD: 6900 Trigger Near Upon Subtle Bullish Signs.BTCUSD update: The initial bearish trend line is clearly broken, and an inside bar has appeared (previous candle). All of this is happening around the 6805 reversal zone boundary. This market is still in the process of setting up for a broader move higher in my opinion. Here is the swing trade trigger to look for: Long 6900 Stop 6488 Target 7460. R:R Approx 1:1.
These subtle changes should not be all that surprising. They are unfolding within the largest support zone relative to this market since the sub 200 lows. The 8171 to 4983 support zone (.618 area of entire bullish structure) has been in play since the 6K low in February. As I have written in previous reports, a broader bottom is a process. IF price breaks the 7492 minor resistance (.382 of recent bearish swing), that will provide confirmation that a broader bullish move is in progress. A broader move higher from current levels can lead this market back to the low 8Ks at minimum over the next couple of weeks.
6897 is the inside bar high and serves as a long trigger for a swing trade, while the 6650 and 6500 levels serve as stops. The reward risk is still very favorable to the bullish side because the minimum target is the 7492 level. So you are risking 300 to 400 points to potentially make around 600 at least. All this market needs is a catalyst or some typical tech drama to motivate a short squeeze.
Price action is leaning toward the bullish side in a way that is not obvious to the crowd. This is what opportunities look like. As always, these signs can be negated by any bearish surprise, but I think the potential is very limited. This market can still retest the 6204 and even 6K, so it is important to always be prepared for those scenarios. Speculating is not about precision, it is about constantly adjusting.
In summary, price action is coiling around a reversal zone boundary near a major low within a broader support zone. You can't ask for a more attractive situation that isn't obvious to the market crowd. The appearance of the inside bar provides technical structure for a long trigger with well defined risk. If this market starts breaking near by resistance levels, it will be confirming a broad double bottom which can eventually lead back to 10K, it is just a matter of time and catalyst. The price action story is saying that the shorts are vulnerable in an area that still looks bearish to the untrained eye. Learn to recognize the subtle signs, not the obvious ones and one way to accomplish that is to acknowledge what the market is NOT doing, rather than always focusing on what it is.
Questions and comments welcome. (See trade signal updates on S.C.).
GBPUSD: Minor Resistance Zone Not Affecting Buyers. Yet?GBPUSD update: Momentum is bullish as price is within a minor resistance zone between 1.4138 and 1.4184. At the moment there is no selling activity which means it is likely to continue higher.
For those of you who don't know, we cover many markets at S.C. Forex is one such market and a technical perspective is published frequently there. What I am presenting here is an example.
With the bullish trend line far from beyond compromised, price is more likely to reach the 1.4301 reversal zone boundary. Forex is a market that I trade both long and short, on a day trading and swing trading basis. This means that IF price action establishes a clear reversal pattern near the 1.4301 area, I will be open to looking for shorts, even in the face of a generally bullish trend.
The key to navigating markets like these is having realistic expectations that are relative to market structure, not random opinions or feelings. If price never produces the bearish signs that I would look for, then I stay out and wait for the next setup.
I share this perspective frequently on S.C., You will see updates to this perspective and any trade calls there.
Comments and questions welcome (PM for response).
ETHUSD: Classic Breakout In Progress, But Watch 432 Resistance?ETHUSD Update: This market has established a double bottom formation around the 375 level and is now attempting to break out. I have placed a limit order to buy at 392 with a STOP at 365 and Target of 445. This is a potential swing trade with almost 2:1 reward/risk.
The current price action at the 416 level (at the time of this writing) is tempting but the problem is price is about to enter a minor bearish reversal zone (432 reversal zone boundary) . The double bottom structure is in place and the initial bearish trend line broken so the bullish signs are there, but being on the conservative side, I would rather capitalize on the possibility of a shallow retrace.
There is a minor .618 support in the 380s and relative to the double bottom, offers much lower risk in terms of placing a stop. I consider placing a limit order under the market like this an aggressive choice for me compared to waiting for price to retrace and then show evidence of a clear reversal formation like a pin bar at the predetermined entry area, but I am willing to take that chance in this particular situation.
The best swing trade entry was the break above the 372 inside bar which occurred on Friday. It offered the lowest risk and is now paying off nicely if anyone got in there. I mention this, even though I missed this entry, because this is what a low risk entry trigger looks like.
For those who are more aggressive, you can consider a long around the current break out level which is 418 (price has moved to 423 as I write this) , but the risk of a fake out is high. This is why I prefer to place a limit order under the market. If you do enter here, I think it makes sense to enter half of your original size here, and place an order for the other half under the market. This way, if the market continues higher, you are still benefiting. If the market fakes out instead, your risk is lower (only half of your original position) and you have an order in place to get a better price. You have to decide which is a better scenario for you.
If the 432 reversal zone boundary is taken out and price closes above it, then the bullish momentum is more likely to continue to the 451 level which is the .382 of the recent bearish structure. This is why I chose the 445 level as a potential target IF this market fills my order at 392.
In summary, the current price action is presenting a classic break out formation. Certainly a welcome situation that makes for a much stronger bullish argument. The problem with buying here is the high possibility of a fake out. It does not mean it WILL happen, but I prefer to buy near supports, not resistances. If the market does not retrace, and my limit order never gets filled, that is okay. I will cancel it and be prepared to enter on the next retrace, whether it is a shallow one or deeper one. Either way, this double bottom formation signals a short term trend reversal that can lead prices back to the high 400's to low 500's over the next week. Make sure to check out the free analysis on S.C. that will provide more detail on this market as it continues.
Questions and comments welcome. (I am going to change up my writing schedule. I will post a new idea every other day, and an update on the alternate days. This means tomorrow I will post an update to this report only, rather than a new report.)
BTCUSD: Revisiting 8400 Support Ares. Long Still In Play.BTCUSD update: After triggering a long at 8721 and pushing back to 9K, price has retraced back to the 8412 support level. This situation is exactly why you do not chase, and instead place a limit order below the market when you miss a trigger. The swing trade limit buy filled at 8815, which was posted on S.C. website.
This price action is tricky to say the least. The outside bar that developed and triggered the long was followed by a bearish pin bar which has taken price back to the 8412 level (.382 of recent bullish swing). This formation has established a lower high formation off of the 9K area. Is this the beginning of a new bearish movement? In my opinion, NO and the reason is: price still has a good chance of producing a failed low formation just above the 8090 level (minor reversal zone boundary). If this scenario unfolds, the swing trade will be stopped out, but if a reversal pattern develops in this area, I will be looking for another long.
If you missed the swing trade entry, you still have a chance to get in but a long trigger needs to occur. This can happen in a number of ways which I am not going to explain here.
What IF price breaks below 8093? That would increase the possibility of retesting the 7776 and 7401 areas respectively. Remember these areas are supports, and shorting into them is extremely risky unless you know exactly what you are doing and have the ability to exit the market quickly if you have to. I do not short these markets, and if I was going to, it would not be at these major support areas.
In summary, my recent reports have been brief because I have been in the Bradenton area of Florida presenting to groups. I have met some amazing people here and had the opportunity to network with very impressive talent. As far as this trade goes, I have been managing inventory for months now and continue to selectively add to it. Keep in mind position trading and swing trading are two separate strategies which contain different stops and targets. For more details on the active swing trade and decisions for my position trade, you can go to S.C. which is still being populated with information. As long as this market maintains the current supports, I believe it is reasonable to anticipate higher prices over the next week at least.
Questions and comments welcome.
BTCUSD: Kicker Formation Begins New Movement Toward 10K?BTCUSD update: Price jumped from the low of 7240 to 8717 in 48 hours which signals the possible beginning of the next broader bullish movement which can lead prices back to the 10K area. This market needs to prove it's new found strength by presenting a higher low formation.
In previous reports I wrote about the significance of the reversal zones, especially since they are overlapping a major support area. These zones (which are contained by the red horizontal lines) are areas where reversals are high probability. When this market was pushing the lows, I specifically mentioned not to react, and instead plan ahead. Planning ahead means recognizing the significance of these levels, and knowing how you will act IF the market provides evidence that our hypothesis is true.
That evidence came, first through the pin bar on this time frame, and then the follow through which is considered a "kicker" formation in candlestick terms. Even if you did not enter the market during this process, it should have been very clear to no longer be or think short. Now the questions is: Will this bullish momentum continue?
Price is retracing slightly which is a good thing because this is where it must prove that it is no longer weak. It can present this evidence in a number of scenarios that you should be prepared for (planning ahead). The first scenario is the shallow retrace which can unfold from the current candle in the form of a small pin bar, especially if this configuration happens to also qualify as an inside bar (which it is at the moment, but has 14 hours to go so it still has time to change). The second scenario is the regular higher low where price retests 7776 area and generates a reversal candle. The third scenario is the failed low where price retests 7401 or 6941 and reverses quickly. The third scenario is the one that shakes out weak longs and sucks in oblivious shorts. IF price does not reverse after retesting the extreme low, then there is a bigger underlying problem in this market.
Isn't the current swing high a lower high? And lower highs lead to lower lows? Yes to both questions but do not forget this has to be viewed in light of the context of the situation which carries more weight. The context is: This market is flirting with a major support zone, and just produced a significant price reversal formation. The fact that this reversal formation has appeared in a high probability area outweighs the structure of the previous short term trend (lower highs, lower lows). Knowing this is what allows you to anticipate and prepare, rather than react.
In summary, analysis and trading are two separate processes that traders and investors often confuse as the same. In analysis we are evaluating and comparing market information in order to estimate what this market is most likely to do next, not what we are going to do next. Once we have a better idea and can assign loose probabilities or weights, we can then figure out what we are willing to do: Buy, sell or nothing. There are 3 bullish scenarios that I outlined above that can appear. There is one bearish scenario which is simply a dramatic new low. It is now up to you to recognize which scenario the market decides to choose, and then execute your trading plan. That plan which should be prepared ahead of time should define everything you do from the triggers to enter, the time horizon, size and level of risk along with profit target expectations. And out of all these factors, time horizon is most important because it provides the foundation for how you define everything else.
Questions and comments welcome.
BTCUSD: Price Poised To Push 9600 Level?BTCUSD update: 8859 minor reversal zone support holds price as it is poised to test the 9616 minor resistance level. A close above this resistance will signal renewed bullish momentum which is more likely to lead to a retest of the 11700 double top area.
The pin bar that appeared off of the 8659 level a couple of days ago is the bullish clue. As you can see, price did not continue higher immediately off the pin bar. There was a bearish candle that appeared first. This candle which is nothing more than noise, looks a lot more dramatic on smaller time frames, enough to suck people into shorts or shake people out of longs. This is why I always emphasize evaluating the bigger picture first. The low of that initial pin bar was never compromised. This bearish failure translates into a bullish sign.
The 9616 level is the .382 minor resistance of the recent bearish swing. Once price closes above this level, it will confirm that a new bullish leg is in progress. Are there swing trade opportunities here? Yes, but like I wrote in my previous report, the specifics to this trade will be published elsewhere. Even without a specific call, there is enough information here to quantify risk and anticipate reasonable targets.
Keep in mind, the fact that price has pushed into the current support has also signaled for me that the near term expectation of this market is a range bound environment. That means the 10422 to 10943 minor resistance (.618 of recent bearish swing) and the 11700 peak area have a higher chance of preventing a broader break out. IF prices tests these levels and shows immediate signs of failure, I will be prepared to lock in more profit on the position trade that I am managing at the moment. IF price just blows through (still possible) I will take no action and let the winner run.
In summary, many less experienced traders often think in absolutes: IF THIS, THEN DEFINITELY THAT. You can't operate in these markets with such limited thinking. Even gauging precise probabilities is more appropriate for PhD's in Statistics, and not practical for speculators looking to capitalize on short term market movement. What is more practical is having the ability to question the market at all times by maintaining a flexible mindset. As price pushes off the current support, and it is strong as proven by the inability to make a new low, how should it behave at the 9616 level? What should the candle look like? How should a strong market present itself upon testing a minor resistance? How should it close? What about if the pin bar low is taken out instead? What does that mean and how does it change expectations for yourself and the herd? These are the questions that you should be asking and answering as the market provides new information.
Questions and comments welcome.
ETHUSD: Pin Bar Establishes New Support For Longs?ETHUSD update: Recent pin bar formation establishes a higher low relative to the 565 low. Simultaneously price has also rejected the 670 extreme support boundary which is also now in line with the new converging bullish trend line. Observe the structure on the bigger picture and what do you see? A broad triangle which can be labelled as a large magnitude Wave 2.
Just like in BTC, the immediate action in this market has been bearish. Smaller time frames will certainly blind you to what is happening where it matters more and that is on the big picture. This minor sell off has done nothing more than push price deeper into a supportive area. The 713 to 520 zone is the .618 area of the entire bullish structure originating from the sub 300 lows. If this market is going to mount a broad reversal and transition back to a more bullish environment, this area is the most probable location for it to begin.
IF price closes above the 830 level, that would confirm the bearish trend line break, and will signal the possibility of the first leg of a larger magnitude Wave 3. Positioning for a move like this requires a plan for entries, adjustments and sizing which you must have figured out ahead of time.
The bullish pin bar that has appeared is one sign of the beginning of a reversal. It does not guarantee that a reversal is necessarily in play. What if the next candle closes lower? What if the newly established bullish trend line is taken out? Bearish momentum can lead price to extreme lows such as the 520 support zone boundary or the 491 extreme support boundary. IF the market chooses this more bearish scenario, I will be looking to buy into that extreme weakness.
In summary, buying a fundamentally strong market is not as simple as buying any pull back. As you can see, since the peak in January, this market has retraced more than 50%. Even though recent lows are attractive buy points, they do not guarantee the best prices. The key to remember is this: there are no "best prices", it is always about what you are willing to risk, and then waiting for the market to provide a scenario where that risk is within range. Are you willing to buy at 1400 and sit through a 50% pull back? (high risk) Or are you willing to wait for a more reasonable price area (50% off the peak) to start building a position? By the time the new bullish leg is in progress, the opportunities that exist at the moment, or leading up to the break out will no longer be available. The goal of this report is to provide perspective, and an idea of what an opportunity looks like. As far as specific trades, they will be available to those who know where to look.
Questions and comments welcome. (PM for fastest response).
BTCUSD: Slow Double Top May Offer Hidden Sign Of Strength?BTCUSD update: Double top formation is attempting to unfold but I would not assert this conclusion yet because it is materializing in such a slow fashion, it is suspect in my opinion. This double top is lacking the selling momentum that usually follows which can be a hidden sign of strength.
When a market rejects a resistance level, especially a second time, price often does not waste time. It sells off quickly and that is not happening in this market. Not only is the bullish trend line still intact, but there is also a minor support at 10754 (.382 of recent bullish swing) that can hold price up for a subsequent higher low. These not so obvious factors point to the possibility that there is no real motivation to sell and all this market needs is a catalyst to spark the move to higher prices.
This type of formation is attractive to shorts, and can suck many in who do not realize that the timeliness of a formation is an important consideration. If I was short, and I was sitting through this lack of progress, I would be uncomfortable and looking to get out because it is not behaving as it should. This is not something you learn in a book, or some free video on Youtube, you learn this by years of observation and getting caught on the wrong side of strong markets. When selling happens, it happens faster than buying.
This does not guarantee that price will continue higher, and the possibility of the double top following through still exits, but the longer price stays above the trend line and/or the 10754 level, the more of a chance it will go higher. Don't be quick to judge a market because of an impression of a formation, instead let the market prove itself. Waiting for this proof usually costs you more in terms of better entries, or less favorable exits, but that is the price you must pay for seeing the market's hand.
Since I locked in profit at 10900 the first time it sold off from this level, I have reduced risk and still waiting for a good price to add more to my long. A clear bullish reversal at the 10754 level is my preferred scenario, other wise I will just stay with what I have. It is very possible for the market to form a shallow higher low off of the trend line and break higher, which is a valid break out signal. Why I will not aggressively add in that scenario is because I do not like buying into the reversal zone which has an upper resistance at 12429. If you choose to buy into that break out, the key to managing more effectively is to be quick to exit if a failure candle shows up while within the reversal zone.
In summary, TA is more than just indicators and charts. It tells a very detailed story if you understand what is "behind" the candles. And to any story, there are at least two sides, and you must always be evaluating both until the market shows its hand. Less experienced traders do not realize that when facing any market environment, there is a high degree of randomness or noise which leads to confusion and a lack of "predictability". The mistake many will make at an inflection point like that one we are facing now is that they will attempt to predict which way the market will go from here. We can evaluate the signs and consider the context to get a better idea of where the bias leans, and take chances when the reward/risk is clear. When it is not, it is better to let the market reveal its intentions.
Questions and comments welcome.
LTCUSD: Consolidating But Still Bullish. 320 Target?LTCUSD update: Symmetrical triangle is unfolding in this market as this sector seems to be waiting for something. A catalyst is required to spark the momentum either way and it is important to determine what you will do once the market makes a choice.
Tight markets like this can be confusing and there is no reason to take new positions at this point until a break out occurs. In the case of this market the bullish breakout would be 218. Just like in BTC, this market still has a bullish bias because of the position of this consolidation relative to the bigger picture. In other words, it is in a higher low position and we know that higher lows often lead to higher highs.
The biggest mistake you can make in a situation like this is to attempt to read smaller time frames which can lead to a lot of confusion. False signals and noise are characteristic of consolidating markets. The best thing you can do is prepare for both possibilities, the break higher and the break lower.
IF the market breaks higher (higher probability), the 289 to 312 resistance area (.618 of recent bearish structure) offers a reasonable short term target. A strong catalyst is required to spark this type of move, whether is comes in the form of specific news for this coin, or a fundamental improvement for the sector. When consolidations break out and they have a strong catalyst behind them, their potential target can be measured by projecting the length of the consolidation vertically. It is an old technique, and is far from accurate, but it does provide some perspective and in this case the potential target is the 320 area.
Keep in mind this market can also break lower. Unless this coin becomes obsolete, the bearish side has much less potential, especially since there are major support levels just under the consolidation. 186 to 138 (.618 of recent bullish structure) is still in play and any retrace into this area is one that I am interested in buying, not selling. A close below the 106 low is the only scenario that would be more of a cause for concern for me.
In summary, markets like this one are not as wild as BTC, but when they move, they do move relatively quickly. It is just a matter of having the patience and the confidence to trust the road map which is still bullish. The other factor that I write about over and over is your risk tolerance. Without a clearly defined strategy for managing your risk, or accepting losses sets you up for reaction trading. This is the irrational decision making that often leads to selling bottoms and buying tops. Let the market show its hand, then take action based on a predetermined plan. My plan at this point is to wait for the next resistance area to be reached so that I can lighten up on my position. If I see any solid opportunities to add along the way, I am still open to that.
Questions and comments welcome.
BTCUSD: Double Top? Or Break Out? Let Market Choose.BTCUSD update:The current candle which has less than 8 hours to close is presenting an inside bar formation. The break out from here can be bullish or bearish and it is up to the market to choose, not for us to "predict".
Based on the current structure that is intact at the moment, the buyers are still technically in control. The recent bullish trend line is still in play which increases the chance of a bullish break out rather than a sell off. Breakout buyers still face the potential reversal zone just above the previous 11788 high which extends up to the 12429 resistance boundary.
Usually when there is a break out, the break out candle closes strong which is not happening. This means it is important to pay more attention to the range of the next candle. If price breaks below 11050, that is a sign of weakness which will be confirmed with a close below 10750 which coincides with the break of the bullish trend line. These signs of bearish momentum can be used as catalysts for lightening a position, or as a stop loss, depending on the type of long trade you are managing.
At the same time. this hesitation may be nothing more than noise, and if the 11500 level is broken instead, that is confirmation that bullish momentum is still in play. This makes it reasonable to expect a higher high attempt which offers the opportunity to let longs run to see if the next resistance levels can be reached.
I do not mention the short side because at this point, the bias is still bullish and shorts, especially on the broader time horizons are much riskier in my opinion. I do not short these markets to begin with, and if I could, I would only short on small time frames which is often not practical.
In summary. the market is at a point where we must take ourselves out of the equation for the moment. It is either going to unfold as a failed high, or break out to new highs which is what the bias leans toward. For my long position, I am looking to buy more, but since there is a hint of a second peak, I would rather wait and see if the lower probability bearish scenario plays out. IF price retraces, it may offer a new opportunity to add to my position. IF price breaks out instead, I still benefit from my long anyway and I will be looking for opportunities to reduce risk and lock in more profit at my predetermined resistance levels. Define your scenarios, have a plan for each one, and then let the market choose. This is what flexibility is all about: the market decides, and you adjust. Our preparedness is how we anticipate, which is much more effective than emotional reaction.
Questions and comments welcome.
BTCUSD: Poised To Break Out? Scenarios To Consider.BTCUSD update: Bullish momentum is carrying price back to the previous peak. A retest of 11788 is likely and this situation offers an opportunity to lock in profit. What about buying the break out? Risk is now higher for the short term, and in this report I will explain some considerations for those who have been long, and those who are out, waiting to get back in.
If you are long, there is no reason to sell at the moment. What is important to consider is the price action that occurs at the 11788 high, and the proportionate reversal zone just above that has an upper resistance of 12429. IF this market is going to peak and retrace, this is the most likely area for the selling signs to appear. For example, the appearance of a pin bar off the high (just like the previous peak) would qualify as such a signal. This scenario would then present a double top or failed high formation.
Double tops or failed highs are signs that imply oncoming weakness, but not necessarily a trend reversal. At this point, I do not know if the market will decide to start selling, all I know is that it is an area that can attract more selling than buying. For the swing and position trade longs, locking in profit (NOT selling your whole position) is never a bad idea in areas like this. To help maximize your winner, do not place limit orders at target prices, instead wait for the market to show weakness. Once the weakness is confirmed (a bearish reversal candle) then you sell some portion of your position.
What about taking new longs? A common strategy is to enter on break outs. A push beyond 11788 is a breakout that will attract these types of buyers. The problem is the potential fake out. Even though though price is more likely to break higher since higher lows lead to higher highs, there is an increased chance of a pull back.
If you are long term bullish like me, you may wonder: Why not buy if its going higher in the long run? The answer to that question is: how much pain are you willing to take? Often when markets look their best, it is a bad time to buy. Best practices suggest buying supports in strong markets, not resistances and once this market breaks out, price will first face the reversal zone resistance, and IF it can break it with conviction, the next resistance is 13012.
As price pushes higher the chances of a retrace increase while reward/risk becomes less and less attractive. One solution to buying the breakout is using a tight stop in case of immediate failure, but this requires a ton of attention. The other problem with this technique is when it comes time to take a profit. Are you using swing trade targets? What if the market turns before it reaches the 12500 or 13K area? You are now managing a swing trade idea that carries larger short term risk, with day trade constraints. Your chances of getting confused and shaken out increase dramatically, especially if you do not have the time to watch these markets all day. It requires a lot more work to escape with a profit compared to if you bought in at a much lower price.
In summary, I like to take risk when conditions are more favorable and usually these conditions are not obvious to the market crowd. By the time the strength is obvious, that is the best time to sell. Why buy highs? They naturally carry more risk, and if you happen to get away with a profit, that high risk behavior was now reinforced by the market. I expect prices to break out and continue higher, but I am long from 10020 and have been since January, which gives me the flexibility of either locking in more profit, or just letting it ride. My plan helped me recognize the opportunities at lower levels and I took the risk. Do not let greed or fear of missing out drive your decisions, instead focus on identifying when the reward/risk is most favorable relative to your trading style.
Questions and comments welcome.
BTCUSD: Setting Up To Revisit Lows? Or Just Noise?BTCUSD update: Bullish momentum is still carrying price higher, but it is slow. In this report I will cover how to manage expectation in this type of environment and what to look for as far as signs of weakness.
When price action hesitates like it is doing at the moment, it can scare traders out of a good position too early, especially for those who have a hard time dealing with losses. The main thing to focus on in a situation like this is the direction of the immediate momentum which is bullish. This is easily defined by the trend line that is still intact. As long as this condition stays true, and price does not close below 10300, it is more likely to grind higher.
The trend line boundary at the 10300 area is a good place to look for reversal candles on smaller time frames, and IF price closes below, it does not mean the trend shifts to bearish. The 9986 to 9723 minor support is still an area to look for reversals also. Price retesting this support just means subwave 2 of Wave v is still in play as long as there is no overlap with Wave i.
A tricky scenario to be mindful of is IF price retests the 8800 area which is the lower boundary of a minor reversal zone just below the 9280 low. A push into this area can appear very bearish and attract over reactive shorts, along with a lot of drama. The key to avoiding getting caught at a low is watching for the establishment of reversal formations, especially if they are pin bars on this time frame. Range bound markets will often test lows and produce false breakouts, especially when they are counter to the broader trend which is still bullish in my opinion.
What will confirm that price momentum is bearish again? Reversal patterns at the current price level are not enough. A break and close below the current bullish trend line along with breaks of the minor support and reversal zone are required. That means price would have to decline by more than 1500 points to finally consider momentum bearish? For my outlook on this time frame, yes. Remember depending on the time horizon you are focusing on, your criteria for defining momentum would be different. If I were day trading this market (which I have no intention of doing) I would be bearish as soon as the current candle closed and price breaks the low of it. That is a much different perspective which carries tight stops and profit targets to give you an idea.
In summary, having a specific plan and predefined criteria to measure against are essential to not getting confused by the hesitant price action we are facing at the moment. Knowing what to look for within your specific time frame is what minimizes those emotional impulses to react to noise. Whether this market chooses to extend the consolidation or fake out and go higher, I am prepared either way and keeping an eye for any attractive opportunities upon any retest of the supports mentioned earlier. I have been bullish the whole way and will continue to manage my position from that outlook as long as the general fundamentals stay intact.
Questions and comments welcome.
LTCUSD: A Break Of 232 Is Beginning Of Wave 3?LTCUSD update: Price action is still consolidating around the 210 level which is building a larger higher low formation. Following the lead from BTC, the price action in these markets are pointing to further strength. The more time they spend trading horizontal often leads to a more sustained move once price breaks out which puts the 300 area within reasonable range.
Consolidations like the one unfolding in this market are important to recognize especially because of the where it is appearing on the road map. The structure serves as a broader higher low formation and offers a number of opportunities to participate before the next leg breaks out.
In terms of Elliott Wave, this formation can be counted as a subwave 2, which means IF the overall bullish structure continues within the impulse configuration, then the next bullish break out is most likely subwave 3. Wave 3's are never the shortest wave, which means even if it turns out to be equal in length to subwave 1, that makes the 312 boundary of the 269 to 312 resistance area (.618 of recent bearish structure) a reasonable target over the next couple of weeks.
Price needs to close above the 232 level decisively which means no long wicks during the break out. I would also consider a break and close above 226 as an earlier confirmation of strength since price would be pushing through the minor bearish trend line at that point.
The questions always are: where do you buy and what can go wrong? IF this markets pushes 226, that is a more aggressive buy trigger in my opinion because it still has to clear the 232 swing high before breaking free of the consolidation. Breaking 232 offers more confirmation that momentum is driving price higher, but you will have to accept a larger loss if the move is a fake out. What can go wrong is a bearish catalyst can surprise the market and scare price back to the 186 to 138 support zone (.618 area of broad bullish structure).
In summary, as I often write, your outlook and risk tolerance play key roles in how you manage the kind of opportunity that this market offers at the moment. You must first consider what kind of time frame you want to participate, and then weigh the risks against the potential rewards. Everyone wants to be in for the big move, but no one wants to face the larger risks, which come in the form of deeper retraces than expected. This is why I emphasize, if you can take the loss without batting an eye lash, then you become immune to the random curve ball that the market can throw at you. This strong hand can be accomplished by appropriate position sizing which is often frowned upon by participants with small accounts, or who are driven by greed, or both. By default, chances of success in the game of speculating or investing in any market are weighed against us just based on our own psychological wiring, not mention other factors like costs and slippage. This is why it is so important to make decisions based on risk first, then consider the relative reward, not the other way around. And risk management begins with how well you know yourself.
Questions and comments welcome.
BTCUSD: Impulse Still Active. Bullish Retrace From These Levels?BTCUSD update: As of this writing a bearish pin bar is forming which indicates the onset of weakness. This is a good sign for me since I am interested in buying into the next higher low to add further to my long. In this report I will discuss the two price areas that I will be considering.
The first point that I want to make is this: the analysis that I write is based on the configuration of the pin bar which is not established yet. It has about 14 hours before it closes which means it has plenty of time to change. It can get weaker which is what I would prefer, or it can close strong which will prevent me from taking any action. TA helps to define multiple scenarios, and then you adjust to what the market chooses, you don't react.
IF the pin bar closes and the next candle continues lower, I am looking for price to present a shallow reversal between the 9956 to 9723 minor support zone (.618 of recent bullish swing). Since this zone is relatively narrow, a break lower will bring my attention to the 9280 swing low. IF price can produce a reversal pattern within these price areas respectively, I will be looking to add 30% to my position.
IF price falls through these levels, (anything is possible) then once again I will be eyeing the 8171 to 7329 minor support (.618 of recent bullish structure) for reversals. Keep in mind the likelihood of this scenario is lower since this market is still within the boundaries of a bullish impulse wave.
I am looking at the current bullish swing as a Wave 1 of a Wave v. The next minor retrace would be the Wave 2. Breaking below the 9280 low will negate this count and imply that this market is in a consolidation that will have to be identified further as it unfolds. If the Wave 2 establishes itself, then Wave 3 should carry price back up toward the 11700 swing high, and likely break higher. Many people get confused when it comes to the subjectivity of Elliott Wave, but remember it is best used to provide a general road map or guide. As the market changes, it offers criteria and categories to base ideas on, expecting more than that is not realistic.
In summary, looking ahead and preparing is much more effective than reacting. Inexperienced traders may focus on the pin bar and look to sell, but may quickly overlook the context of the situation surrounding this formation. With the bullish impulse wave still intact, this market is still has a short term bullish bias which reduces the weight of bearish formations like a pin bar, or lower high until the impulse is negated. This information alone should at least help you to look for support levels to hold rather than break, and more importantly to anticipate bullish reversals. This is how understanding context guides your decision making process which is much more effective than simply reacting to a candle formation alone.
Questions and comments welcome.
ETHUSD: Price Still Vulnerable WIthin Triangle?ETHUSD update: Now that a positive catalyst has once again sparked a BTC rally (no surprise) this market has more context to rally even though it has been somewhat sluggish compared to BTC and LTC respectively. The good news is this market is coming off a major support zone with momentum that is backed by supportive structure. How do you buy if you missed the trigger?
During the minor retrace lead by BTC, this market retested the 872 to 739 major support zone (.618 area of broad bullish structure). Within this area the 824 level (.382 of recent bullish structure) was also tested which lead to an outside bar. This configuration is not only a very bullish sign (the newly formed bullish trend line) but it was followed by a minor higher low that served as a long trigger within the major support zone.
I did not write about this particular trigger because I was more focused on BTC and LTC opportunities, I also did not take this trade because I was not overly enthusiastic about this market's lack of responsiveness. So the big question: Is now still a good time to buy?
The answer depends on your outlook and how much pain you are willing to take. 816 is the current swing low and reference point to measure risk from. And that is the lower risk swing trade perspective. If you are looking to enter for a broader move, you have to be okay with the possibility of price retesting the 739 lower boundary of the broad support zone (it can happen). This increased risk means if you are too aggressive with your size, or too nervous about pull backs, you are more likely to get shaken out if any bearish drama follows.
If the momentum is bullish, shouldn't price just keep going now? Why worry? Speculating in any financial market is like playing a game of musical chairs, once the music stops, you better be close to a chair. In trading this means you must always consider your position if everything falls apart and then ask yourself if you can handle it. What can go wrong in this market? The 921 resistance is still in play and beyond that the broad bearish trend line in the 940 area also stands in the way. With bullish momentum supporting price, these resistances are more likely to break, but IF they don't, especially if price action forms a lower high, that would make this market more vulnerable to bearish catalysts or short term drama.
In summary, the overall market structure at the moment is more of a consolidation than a clear trend (as defined by the converging trend lines). This broad triangle is one giant continuation pattern in my opinion, and offers plenty of bullish potential if you are able to hang on during the over reactive pull backs. A break of the lower boundary of this broad triangle is not a major bearish sign, but it could lead to the retest of lower supports especially in the face of any newly formed head and shoulders pattern. I only mention the bearish possibilities because they are important to recognize when assessing the type of risk you are willing to take. Overall I am bullish on this market, it is just a matter of waiting for a price that is in line with my criteria, especially since I am holding other positions that are correlated to this market generally.
Questions and comments welcome.
LTCUSD: 218 Break Out Can Lead To Test Of 260?LTCUSD update: As BTC is pushed lower by bearish momentum, this market is acting relatively strong by maintaining a tight consolidation. Often this type of relative strength leads to higher prices, especially when combined with the potential effects of this type of trend continuation pattern.
The symmetrical triangle is a form of consolidation that is considered to be a trend continuation pattern. The key to capitalizing on these formations is in waiting for the break out. The most important consideration is the over all market context that the consolidation is appearing within.
In the case of LTC, this triangle formation is materializing after a minor retrace which followed a well defined bullish structure off the recent lows of the 106 area. Simply put, it is forming a higher low just above the 186 support level. The 186 to 138 area is the .618 support zone relevant to the broad bullish structure of this market. This configuration in my opinion is a sign of strength and offers an opportunity to add to a position trade or even initiate a swing trade upon the break out which puts the trigger at 218.
My long term outlook remains bullish on this market and I have been carrying a position since the 50s. My more recent purchases have been in the 150 and 230 areas respectively. I will look to add at a break of 218, but keep in mind this is a position trade which means I use no stops or targets. I manage risk with strategic sizing. The swing trade, which has a more defined risk can be taken upon a break of 218, with a stop just below the 181 swing low. Which strategy YOU choose depends on your goal, outlook and risk tolerance. The first target for the swing trade would be the 260 level which is just below the 269 to 312 resistance zone (.618 resistance area of recent bearish structure) . It is also within a minor reversal zone that is projected off the 254 recent high.
What IF the triangle breaks lower instead? For one, it cancels the swing trade scenario, and secondly, a break lower will put price right back into the .618 broad support zone where I will be looking for new stability to materialize anyway. Any dramatic selling in BTC is more likely to affect this market in this bearish way, so that is something to keep an eye on, especially if you are more interested in the shorter term move.
In summary, at the moment this market is acting relatively strong to BTC which indicates it is poised to outperform IF BTC finds strength in the coming days. These type of correlations or relationships work until they don't so it is not something to count on 100%, just another argument to add to the mounting bullish signs in this market. For my position trade, I am looking to add on the 218 bullish break, and looking to lighten my position well into the next resistance zone which is the 269 to 312 area. Within that area, there is a 2.618 target projection which serves as a good point of reference. I am bullish and can afford the risk if this market falls apart, and that is something you need to strongly consider if you are looking to take a position as well. There is no safety in these markets, it is all about what you can afford to lose. If you can't lose, you especially should not be speculating in these markets. A trade should begin with your own personal assessment of risk, not a pattern on a chart. You do not need to be an expert analyst to know your level of risk, you need to be an expert at knowing yourself.
Questions and comments welcome.
BTCUSD: Minor Retrace? Or Retrun To 9600 Support?BTCUSD update: Price is retracing off of the 11700 high, but what is more important to notice is the bearish pin bar that formed and it's low compromised. This bearish signal was one of the scenarios I was anticipating at or near the bearish trend line. What does this mean?
I published a quick update that said I sold 15% of my position. I did NOT exit my entire position, all I did was lock in some profit which was part of my plan if you read the details of my previous reports. I am still bullish, but I am simply following best practices: sell into strength. Locking in some profit is never a bad idea, and it reduces risk. If you don't understand this, then greed drives your perspective. It also means you have not learned anything from the 20K sell off.
Do I think this market is going higher? Yes. I locked in some profit just in case the retrace becomes more pronounced which is still possible. In fact, the bullish trend line was tested at the 10680 low and held which is a sign of strength. The problem is this market needs to establish a bullish reversal pattern in the current price location, otherwise it may break the trend line.
If the trend line breaks, is that the start of a new bearish move? Not necessarily. It just means momentum is becoming less bullish. If there is a break and decisive close below the trend line, I will be watching for the 9604 level (.382 of current bullish swing) as the next support for a bullish reversal and place to add to my position trade.
In summary, my choice to sell 15% of my position was not a reaction. It was a predetermined adjustment that I described ahead of time, which required the market to show a certain condition, and it appeared. Emotion does not drive my decisions, my well defined plan does instead. I was interested in selling around 11400 but instead of placing a limit order earlier, I chose to give the market a chance to go further. This is the trade off that we must always face when in these situations. I can place a limit order and sell too early if the market goes straight to 12K, or I can give the market a chance in which case I may get less than 11400 if I use a candle low as my trigger to take profit. There is no perfect way to do this. Your choice here is a function of your risk tolerance. I still have 85% of my position, so what if I make a little less as the market goes higher, and I will add back to it IF the market gives me that opportunity. Managing a position trade is like managing inventory, and I just locked in some "retail" prices at a potential peak.
Questions and comments welcome.
BTCUSD: Strong Close Can Lead To 14K Push?BTCUSD update: Higher high takes out bearish trend line as anticipated. With the 9890 to 10836 minor resistance cleared and bullish trend line still intact, the next resistance area that I am looking for is the 13012 to 14889 zone. At the same time, I am still open to locking in 15% of my position if price action presents a reversal signal in the current price location.
For those who have been following this position trade, my average price is 10020. The swing trade call that I made at 8854 paid an 1800 point profit (if you sold at 10500) and IF you held onto some as I suggested, you are riding a winner. The main premise behind the position trade was the magnitude of the support zone that the market reacted to which was the 8171 to 4983 area (.618 relative to entire bullish structure). And consistent with this premise, price has cleared the minor resistance zone of 9890 to 10836 (.618 area of recent bearish structure). The next area to consider is the 13012 to 14889 resistance zone (.618 relative to entire bearish structure).
The bearish trend line break around the 11400 area is a significant bullish sign. It serves as evidence that the bearish momentum that took this market to 6K is no longer in effect. This does not mean the market won't retrace though. In this scenario, I would expect support levels to offer a better chance of holding, rather than this market testing new lows. Keep in mind, price has not cleared a small reversal zone that is just above the most recent minor peak. IF a bearish candle formation appears at the current level, that would signal a failed high and more than likely lead to a retrace. On the other hand if there is a strong close, then it is reasonable to expect bullish momentum to carry price into the higher resistance zone over the next few days.
In the failed high situation, I am looking to sell 15% of my position, otherwise I am holding for the 13 to 14Ks. Letting a winner run is a best practice and requires the flexibility to adjust if the market presents a less favorable sign. Part of my plan was to see how price behaves on the break of the trend line. Any trouble, I will lock in some profit and reduce risk, otherwise hold. I may not be able to update this post with timely order information so it is not wise to depend on me for these types of decisions. I am telling you my plan, and you must have the ability to make the judgement on your own whether to lock in or hold.
In summary, one of the best lessons you can take away from this trade is this: To benefit from a broader move, you must be able to see the opportunity before it becomes obvious to the herd. If you find yourself confused because of conflicting information the whole way up, it is because you lack your own perspective and are missing a process to evaluate market information effectively. This will especially be the case if you are a hyper consumer of internet news which only serves to benefit marketers. All financial markets, especially this one, are environments that flow with uncertainty at all times. Price action can help us get a sense of how the crowd is likely to react, but the key to benefiting from this type of evaluation is also having the mental flexibility to adjust if your scenario is negated. There is no certainty, only probability. Our goal is to find ways to stack probabilities in our favor enough to justify taking the risk and usually when these opportunities are present, they are not obvious.
Questions and comments welcome.
LTCUSD: 229 Break Out Can Lead To Test Of 265 Resistance?LTCUSD update: Price action presents a shallow retrace which has established a minor higher low at 212.50. Higher lows often lead to higher highs, so if you missed the earlier buy signals in this market, a new one may be in order, BUT it does not come without some increased risk.
Since the turn around in BTC, the coins have all established bullish trend lines. As long as the markets can stay above these trend lines, higher prices are more likely. In the case of this market, the trend line support is at the 205 area. In terms of waiting for a more attractive buy signal, this level would be more appropriate since it has structure and proportion behind it. IF this trend line is broken, that does not mean the market turns bearish, it just means the current bullish momentum is changing (possibly to a more range bound environment).
There are two ways to participate in this situation:
The aggressive way is to buy the bullish breakout. That would be in the form of price breaking above the counter trend line which is around the 229 area. This choice carries more risk because you are buying right into the 231 to 265 resistance zone (.618 area relevant to recent bearish structure). Buying this breakout is betting that the resistance will be cleared now that momentum is bullish. This requires agility because any sign of failure after the breakout can lead to a retest of the lower 200s. If it follows through instead, you will have a position that has a reasonable target around the 300 area (2.618 extension measured from 106 low). If you use the 200 area to define risk, R:R is 2.3 which is worthwhile for a swing trade in my opinion. The question is, are you willing to take a 30 pt or greater loss if the market turns?
The conservative strategy is to wait for a possible retest of the 200 level, followed by bullish reversal signs such as a pin bar, etc. In this scenario you are still betting that price will push through the upper resistance zone, but you are getting a much better price. IF this market breaks below the 200 area, it is more likely to continue as a consolidation rather than a retest of the 106 lows.
If you are new to these markets, following analysis like this in a literal sense will not help you be successful. The idea here is to provide a perspective or range of ideas that you modify and make your own based on your personal risk profile. The best thing you can do is learn what factors are being considered and figure out how to interpret this type of information on your own. Following any analyst, whether they are on here or anywhere else still puts you a step behind because you do not have the confidence that gave the author the reason to share their respective ideas.
In summary, this market is showing a formation that presents an opportunity. How you participate in this opportunity depends on what kind of risk you prefer to take. IF the bullish trigger occurs at 229, and you buy, you must accept the possibility of the immediate fake out and failure. If you recognize the signs, you can get out earlier. These types of decisions must come from you, your process and your risk profile. Expecting simple "predictions" and outcomes from any analyst is unrealistic. You must be proactive in your decision making process and know ahead of time what type of trade you want to participate in along with a set of specific outcomes. This structured decision making is what your "plan" should help you accomplish for every trade you take, whether its a day trade or position trade. Managing my position trade, I am looking to participate in both scenarios and temper my risk with size since I am in this for a broader move. Price breaks out, I will look to buy smaller. Price retraces to 200? I will look to buy bigger. My risk is managed with my size.
Questions and comments welcome.
BTCUSD: Bulls In Control Unless Trend Line Breaks?BTCUSD update: Retrace off of bearish trend line in progress as price action establishes an engulfing candle. Is this the turning point that will lead to a retest of the lows? Or just a small bump in a broader bullish move? The answers come from your outlook and your risk appetite, while the chart offers a structured way to plan your decisions which is more effective than reacting.
Having your OWN perspective and outlook frees you from the confusion of the hype. From irrelevant news that aims to drive traffic, to over exaggerated analysis written to attract attention, it is very easy to become indecisive when the market gets a little shaky. Bullish momentum is easy (if you are long), but when a retrace comes along, that's when fear begins to distract you from your original plan, especially if you are a regular consumer of low grade information. The solution? Learn how to weight and categorize information based on your OWN perspective and outlook.
My perspective and outlook has been bullish and still is. I am managing a position trade which means I am looking to capitalize on a broader move higher. The price action that is occurring now was a scenario that I was anticipating. It is not that surprising that selling shows up at the 9887 to 10836 resistance zone (.618 area of recent bearish swing), and simultaneously off of the broader bearish trend line. In my previous report I wrote that I was going to sell 15% of my position around the 11,400 level depending on the price formations. The market never went to that price, and the bearish engulfing candle came sooner. Can you see why I have not been encouraging people to buy at these higher levels?
What to do now? Lock in some profit earlier because of a selling pattern? My answer is in my outlook for my trade. I am playing the bigger picture and expect much higher prices based on the magnitude of the level that this market is coming from. On top of that, the bullish trend line that is still intact carries more weight than the engulfing candle and tells me that buyers are still present (especially if an inside bar forms). Since momentum and structure is still generally in my favor, I am willing to risk the profit that I am managing at the moment in order to let my plan play out. My outlook and perspective along with the supportive structure on the chart all tell me the 11,400 trend line break is still reasonable to expect. I suspect that price will push when the bearish trend line is compromised, and any failure in that area is when I will sell 15% of my position (especially since it would be considered a double top formation at that point). IF price never shows any subsequent failure, I simply let my winner run.
The scenario that would cause some concern for me would be a decisive break and close below the bullish trend line which means price would be push below the high 9Ks. In that scenario, I still would not sell, I would wait for the next bullish retrace attempt and then unload some there. By operating this way, I give the market a chance to go back in my favor, or at least offer a better price to lock in some profit and reduce risk AFTER it has proven weaker than anticipated.
In summary, having a perspective, knowing how to weight information and accepting the relative risks are paramount to sticking with a bigger picture plan. Can some news come out of nowhere and hammer this market? Sure, but I am willing to take that risk. Managing a position trade is more like managing inventory. When the cost of inventory gets cheap (market is selling off) you buy at wholesale prices. When peak season comes around (new highs) you unload it at retail prices and then wait for wholesale prices to come around again. As long as prices are not going to zero, this is a good analogy to consider. Charts help us measure, evaluate and anticipate, they can't decide our risk appetite, only you can.
Questions and comments welcome.