Bitcoin: Bears Still In Favor 17K.

25 sept 2022

Since the 19,500 swing trade sell signal (previous article), Bitcoin has offered about a 1K+ profit potential, but barely enough to justify the risk (depends where you placed the stop). Either way, price refuses to break 18K and has even attempted to print a conflicting signal (bullish pin bar) which could have justified an aggressive long. As a swing trader, what is the best choice of action here?

It is important to realize that Bitcoin does NOT trade on its own. Since the FOMC meeting over the previous Wednesday, the stock market (S&P) and bond market (10 YR Note) have pushed lows while the Dollar index has made new highs. This economic situation will mount bearish pressure on Bitcoin over time if it continues, even if Bitcoin appears to be going against the trend at the moment (one bullish pin bar hardly means anything).

The economic environment is still BEARISH (don’t fight the FED), and the broader technical structure is still BEARISH (lower highs everywhere, resistances respected). While Bitcoin appears to hold the 18K support area, probability continues to favor a bearish break. It’s a matter of catalyst. No matter what any of your favorite fake gurus tell you, focus on the market facts, NOT people’s opinions or emotional reactions (your magical RSI will not help you here).

Keep in mind good risk management is the recipe for success in this game, not big wins. As far as swing trades, while a buy signal may develop around the 18,500 to 19,500 area over the coming week, (fake gurus will scream double bottom), the potential for any sustainable rallies is LOW. If you go long, the 21K AREA is a reasonable expectation (not 40K). Short squeezes can happen, but do not confuse this for a broader trend reversal.

The short side is still the right side (for now). The thing is, you do not want to get caught short from a bad price (the low). A dramatic short squeeze can be very costly. I called a short from 19,500 which is technically still in play. The NEXT short signal would be another momentum continuation pattern upon the break of 18,500. Risk can be defined from the 20,500 level. 2K points of risk means you need to make AT LEAST 2K points or more to justify the risk. The more conservative scenario would be to WAIT for a sell signal to appear upon the test of the 21 to 22K area resistance. This can take a week to develop. Probability and reward/risk are better around relevant resistance levels.

I just want to mention that for weeks I have been calling for the 17K price target. The market refuses to break. I can’t tell the market what to do nor do I think I know more than the market. While probability still favors this forecast, it does not mean that the market will deliver the outcome. Markets are highly RANDOM and unless you have inside information, there is no way to forecast longer time horizons accurately (even though many gurus make these claims).

When trade signals appear, it does not mean you have to assume risk. A signal needs to be evaluated carefully. Where is it appearing? Is it with or against the broader trend and economic context? Most importantly what will negate the signal and call for an adjustment? What are the chances the momentum will continue and how far is a reasonable profit target? These questions need to be answered BEFORE you take a position. Sometimes the profit potential barely justifies the risk and the best choice is to stay out.

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