BTC - The Rally Continues or Is This A Short Term Top?
This has been a significant rally off the bottom, but what makes this rally different then the others? The market was simply at a sentimental low and when everyone is shorting, and the majority starts thinking "maybe 3k happens" (including myself) we often get a reversal. Whether it was the whales, the VIX, or a butterfly in Costa Rica is insignificant.
Experience tells us that this is the wrong time to sell and we held true to our conviction, though it was not without pain.
Bitcoin' exceeded our trade levels which is not uncommon during the initial rally off an extreme low. Many times these are short lived as shorts get squeezed and sideliners jump in the game only to be followed by a pullback and continued selling. That is not what we saw here. We mentioned that there was a trade setup around the 8126 level, and though it looked good, it was at a level where there was the potential for a reversal and this early into a bull move we simply passed. Bitcoin' however did not pass and continued higher, hitting the upper resistance level for a brief time before pulling back to the 0.382 retrace of the minor bullish swing. If this were a stock I would simply short some calls locking in profits to reduce risk and maximize the gains. However there are no options here so we have to adjust our strategy.
We have updated the chart with the assumption that this may be a short term top completing wave 3. To be clear we can continue higher, but the higher we go without a descent correction the more likely a pullback is swift and deep. This is a level to be closing out trades not opening them. Regardless of how the market moves we will stick to this is simply a "no trade zone". Day trading is different, but we are not day trading, we are looking for swing and positional trades.
Minor support is currently found at the 8447 level and a bullish reversal here may result in a failed top or an ABC correction taking us into the main reversal zone of 7751 to 8126. There are several overlapping levels of significance here, including wave iv. Major support is found at the 7487 level for which are count would still be valid. 7751 to 8126 is the ideal zone we are looking for a bullish reversal. More aggressive traders may look to catch a bounce from the minor support level of 8447 but this early into a bull run I do not like to take un-necessary risks. From a broader perspective there is plenty of room to run and I want to make high probability trades, not just trade to trade. I can go to Vegas if I want excitement gambling.
How the market unfolds over the next few days will provide insight into the broader direction of the market. In early and late market cycles we should exercise caution in trading, and forego unnecessary risks. As investors we are starting to see our portfolios turn green, and as the market directs us we can increase our exposure when the time is right.
In closing many are getting or have already gotten their first lesson in money management by trading on margin. I can not emphasize enough that shorting any equity using margin is a risky endeavor unless #1 it is cash covered, or #2 you have the equity and do not mind it being assigned. In all my history I have never seen a long term investor lose more money than they invested buying equities outright. I have seen them lose their investments, but their risk was defined. Define your risk and do not invest more than you are willing and able to lose. Your dreams of fortunes will likely end in nightmares as many are currently finding out. Markets trend up long term. The DJIA is up from 10,20,30.....100 years ago. If you believe in the crypto space this market will be no different. 10 years from now it will be higher, and many will be saying at that time, "If I would have only bought every week and held I would be a millionaire".
Experience tells us that this is the wrong time to sell and we held true to our conviction, though it was not without pain.
Bitcoin' exceeded our trade levels which is not uncommon during the initial rally off an extreme low. Many times these are short lived as shorts get squeezed and sideliners jump in the game only to be followed by a pullback and continued selling. That is not what we saw here. We mentioned that there was a trade setup around the 8126 level, and though it looked good, it was at a level where there was the potential for a reversal and this early into a bull move we simply passed. Bitcoin' however did not pass and continued higher, hitting the upper resistance level for a brief time before pulling back to the 0.382 retrace of the minor bullish swing. If this were a stock I would simply short some calls locking in profits to reduce risk and maximize the gains. However there are no options here so we have to adjust our strategy.
We have updated the chart with the assumption that this may be a short term top completing wave 3. To be clear we can continue higher, but the higher we go without a descent correction the more likely a pullback is swift and deep. This is a level to be closing out trades not opening them. Regardless of how the market moves we will stick to this is simply a "no trade zone". Day trading is different, but we are not day trading, we are looking for swing and positional trades.
Minor support is currently found at the 8447 level and a bullish reversal here may result in a failed top or an ABC correction taking us into the main reversal zone of 7751 to 8126. There are several overlapping levels of significance here, including wave iv. Major support is found at the 7487 level for which are count would still be valid. 7751 to 8126 is the ideal zone we are looking for a bullish reversal. More aggressive traders may look to catch a bounce from the minor support level of 8447 but this early into a bull run I do not like to take un-necessary risks. From a broader perspective there is plenty of room to run and I want to make high probability trades, not just trade to trade. I can go to Vegas if I want excitement gambling.
How the market unfolds over the next few days will provide insight into the broader direction of the market. In early and late market cycles we should exercise caution in trading, and forego unnecessary risks. As investors we are starting to see our portfolios turn green, and as the market directs us we can increase our exposure when the time is right.
In closing many are getting or have already gotten their first lesson in money management by trading on margin. I can not emphasize enough that shorting any equity using margin is a risky endeavor unless #1 it is cash covered, or #2 you have the equity and do not mind it being assigned. In all my history I have never seen a long term investor lose more money than they invested buying equities outright. I have seen them lose their investments, but their risk was defined. Define your risk and do not invest more than you are willing and able to lose. Your dreams of fortunes will likely end in nightmares as many are currently finding out. Markets trend up long term. The DJIA is up from 10,20,30.....100 years ago. If you believe in the crypto space this market will be no different. 10 years from now it will be higher, and many will be saying at that time, "If I would have only bought every week and held I would be a millionaire".
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