Bitcoin: No Momentum 25K Still In Play.

29 may 2022

Bitcoin has been stuck between 28 and 30K for over a week. There have been numerous buy and sell signals that don't follow through. What to make of this price action? And what is reasonable to expect for the coming week?

On Monday of the previous week, I actually shared a swing trade short signal with followers. I made it clear that I was NOT going to take the position myself since I do not short Bitcoin. Price is still gyrating around the entry price of 29,200. Since the entry, price has been as low as 28K which offered some profit, but no where near the profit target. I mention all this because it is a common situation that traders can find themselves in and would rather hope for the best than reevaluate risk and make adjustments.

In this situations, you MUST place the most weight on the broader CONTEXT, NOT the price action at the moment. NOTHING has changed in terms of the broader context. Short term price structure is still BEARISH. While a lack of follow through on the sell side can be interpreted as a sign of hidden strength, it does not amount to much in terms of taking risk on the long side because of the overall LACK of potential in this environment. Lack of potential is something you CAN'T SEE but can be gauged by price structure and levels.

The 32 to 34K area is the key resistance that needs to be CLEARED in order for Bitcoin to PROVE that bullish momentum is more sustainable. Otherwise any minor or quick movements between 28 and 34K is MEANINGLESS in light of the bigger picture. The reason is: the 34K area is a lower high and lower highs usually lead to lower lows UNLESS the market changes. This is how I let the market TELL ME what to think.

For those who are short from 29,200: You can reduce the overall risk by tightening the stop to 30K (chance of stop out is higher), you can exit now for break even or small loss and cut risk completely (lack of momentum is not a bad reason for such a choice). Or you can bet on the side of the overall structure and let the position ride until the full stop is reached. This choice is a function of your OWN personal risk tolerance, NOT a signal on the chart (NOTHING has changed). Keep in mind a bearish catalyst can come out of no where and next thing you see is price pushing the 28K minor support. IF 28K is cleared again, a test of the 25K support becomes much more likely.

What about the movements between 28 and 33K for those who don't have the patience to sit through price noise? A 5K point range can provide opportunities for those who are operating on the smaller time frames (day trades). The thing is, if you are unable to navigate the larger time frames and recognize the broader probabilities (which is EASIER), what makes you think you will do better on smaller time frames? While the technical risk may be smaller (if you respect it) the random element is even greater.

Human nature is our greatest liability in this game. The sooner you recognize that, the sooner you will change your focus from chasing profits to protecting them. Stop trying to "think" where the market will go next, and instead accept the RANGE of possibilities while always maintaining an OPEN mind. Markets are highly random, profits are highly random, RISK is the only factor we can CONTROL. Identify reasonable scenarios relative to your chosen time frame and then evaluate the risk. This process should be done BEFORE price action presents an opportunity.

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