Bitcoin: Bearish All You Want, These Are Wholesale Prices.

24 nov 2019

Bitcoin breaks the 8K support, takes out the previous 7290 low and pushes into the 7275 to 5464 broad support zone. What does this price action mean in terms of the bigger picture and is there still a buying opportunity here? In a recent video, I pointed out that we treat trend and momentum as two separate elements when we evaluate Bitcoin for trade possibilities. And from that perspective, here are some points to consider as Bitcoin continues to sell off.

1, The 7275 to 5464 broad support zone is proportional to the impulse structure defined by the 3150 low to 14K high. This location is most attractive for much longer time horizon strategies like position trades (hold for weeks to months), BUT price action is not yet supportive.

2. Price has now made some progress (continuation of broad Wave 2 beginning from 14K peak) by taking out the 7K level, which increases the possibility of further weakness. Is this a trend? On the short term, we can now say yes BUT do not lose site of the fact that price is in a location where it can complete the Wave 2 corrective consolidation. This is still a very high risk location for swing trade shorts.

3. 6558 is an extreme reversal boundary that is proportional to the recent short squeeze off of the 7290 level. IF price establishes a reversal pattern around this area, it will offer a high probability, high potential swing trade opportunity based on our strategy. This will not be apparent on smaller time frames. There is some evidence of buying in the form of the long tail on Friday's candle.

4. The break of the inside bar low at7102 has generated a sell signal and triggered further bearish momentum continuation. This type of price action is best for very short time frame strategies such as day trading. The advantage is you can take quick profits without being exposed to the broader location risk, but do not get carried away with unreasonable price targets. 5K is possible but much less probable. A drawback to day trading is it requires an enormous amount of attention, and the ability to be extremely decisive and mentally flexible at the same time. The smaller the time frame, the faster things change.

5. Be careful to not mix time frames. Do not project swing trade targets while justifying day trade risk. Chasing profits is not an objective. Know the type of trade you are entering before you enter it. We define our objectives by time frame, and only consider swing and position trades (day trades are not within the scope of our long only strategy).

6. There are two potential trade opportunities in this general location: A bullish reversal for a swing trade long and accumulating more inventory (risk managed by size). In terms of inventory, there are two ways to go about it: 1) aggressive which means step in front of the market now and be prepared for further selling (pain) or 2) WAIT for evidence of stability in the form of buying activity such as pin bars, double bottom, higher low, etc.

When it comes to swing trades, especially when we stick to only one side of the market (long only), these situations are very easy because there is NOTHING to do but wait for a reversal setup. It is NOT about when, it is all about IF. We make no predictions, have no opinions or expectations when it comes to short term market timing. Either the market aligns with our rules and let's us play, OR it doesn't.

In summary on the time frame that we operate within, it can be argued that the short term trend and momentum are aligned. While these elements do not fit within the rules that govern our swing trades, we are open to accumulating Bitcoin at these unusual and attractive prices for the long term (position trade) . These are the kind of situations that we WAIT months for, and because we were careful to preserve our capital throughout this corrective consolidation, we have the resources available to expand our inventory at wholesale prices, not retail.