Bitcoin: Bullish Engulfing Candle Establishes New Long Setup.

3. Jan. 2020

1. We focus on price action, levels and probabilities. News, drama, and other non order flow related information carries little weight in our decision making process. I have been explaining that the probability of this overall location favors bullish reversals which is why we did not exit our swing trade long in the face of bearish order flow (see 7275 to 5464 support zone).

2. I made this point in my previous article: "Can Bitcoin test lower prices? Anything can happen, BUT price would have to close below 6850 in order to prompt a retest of the 6550 reversal zone boundary. Any bullish reversal pattern in these areas would offer compelling swing trade and position trade opportunities based on the criteria of our strategies." Yesterday's bearish candle was NOISE and nothing more than a lure for short liquidity.

3. The bullish outside bar (engulfing candle) establishes a HIGHER LOW formation off of the 6900 level. This can be the very beginning of a broad Wave 3 IF 6450 is not compromised again. Higher lows often lead to higher highs.

4. Within the 7275 to 5464 support zone, there is now an inverted head and shoulders formation. This is a large magnitude reversal pattern that has developed within a location that favors BULLISH patterns.

5. In order to see momentum follow through, price needs to close above 8K. IF such an event unfolds, 8500 and the low 9Ks are likely to be tested with hours or days (with the help of all the small time frame short margin liquidations).

We are maintaining our swing trade long and patiently WAITING for price to reach our proportional targets (mid 7Ks, mid 8Ks and low 9Ks). We focus on price action as it relates to levels and probabilities, nothing else. I hope you found this update helpful for your own analytical process. My goal is to provide market context, perspective and an idea on how we manage our trades in this environment.