monkia
Long

BTCUSD - 5 reasons I'm calling a reversal now

BITFINEX:BTCUSD   Bitcoin / Dollar
1648 18 20
1. Volume up (not just the odd spike but hourly for the past 12+ hours)
2. Sustained RSI divergence on 1 hour chart
3. RSI oversold on all time frames over 4 hours
4. Most EW agree we are in the final wave 5 of an impulse down
5. SEC hearing at 3pm as the 'news' catalyst where we will see regulation helping to make the crypto space more instituational
https://www.banking.senate.gov/public/_cache/files/a5e72ac6-4f8a-473f-9c9c-e2894573d57d/BF62433A09A9B95A269A29E1FF13D2BA.clayton-testimony-2-6-18.pdf

What I want to see next is a higher low on the 4 hour TF.

Testifying conclusion (page 9)
----------------------------------------
"Through the years, technological innovations have improved our markets, including through increased competition, lower barriers to entry and decreased costs for market
participants. Distributed ledger and other emerging technologies have the potential to further influence and improve the capital markets and the financial services industry. Businesses, especially smaller businesses without efficient access to traditional capital markets, can be aided by financial technology in raising capital to establish and finance their operations, thereby allowing them to be more competitive both domestically and globally. And these technological innovations can provide investors with new opportunities to offer support and capital to novel concepts and ideas...... Said simply, we should embrace the pursuit of technological advancement, as well as new and innovative techniques for capital raising, but not at the expense of the principles undermining our well-founded and proven approach to protecting investors and
markets. "
Kommentar: Links:
Web cast of hearing:
https://www.banking.senate.gov/public/index.cfm/hearings?ID=D8EC44B1-F141-4778-A042-584E0F3B9D39

Witnesses:

The Honorable Jay Clayton
Chairman
U.S. Securities and Exchange Commission
https://www.banking.senate.gov/public/_cache/files/a5e72ac6-4f8a-473f-9c9c-e2894573d57d/BF62433A09A9B95A269A29E1FF13D2BA.clayton-testimony-2-6-18.pdf

The Honorable J. Christopher Giancarlo
Chairman
U.S. Commodity Futures Trading Commission
https://www.banking.senate.gov/public/_cache/files/d6c0f0b6-757d-4916-80fd-a43315228060/A2A6C1D8DDBB7AD33EBE63254D80E9E3.giancarlo-testimony-2-6-18b.pdf
Kommentar: Ok, so what to do now depends on your risk profile. You could dump in your cash now but that's very risk in this bear environment, this could just be a temporary pull back.

I'm sitting on cash to invest so I am looking for candles closing on a lower low followed by a higher high. Typically, but not always, the longer the timeframe you see this formation on the lower the risk.

1) Higher risk - 1 hour time frame
Look for a pull back and close with a higher low followed by a higher high. e.g. next hour pull back to around $6.3k and then the next hour or two a high that is greater than the bar that just ended ($6690).

2) Medium risk - as per above but on the 4 hour timeframe

The other option is to watch out for a double bottom with a strong volume based rejection. i.e. we retest the 6k low but bounce back quickly and aggressively. I'd want to see this with at least 3-6 hours (the more the better) separating them.
Kommentar: Be weary of a bull trap which could form around 7400 which is meaningful in the short term because:

1) 0.382 of the recent bear wave since 3 Feb
2) Provided resistance to a potential recovery yesterday
3) Will coincide with the 1HR 50 EMA
4) Has the diagonal down trend line that was broken yesterday just above it (7.4-7.5k)
Kommentar: The right formation is showing on the 1HR TM with a higher low. We need to see a candle close around $7k to a higher high now.
snapshot
Trade ist aktiv: I'm averaging in from here. Added a trade at 7650.
Kommentar: This could easier reverse, it's high risk at this stage so position sizing is important to control risk. No stop loss for me as this is long term investment buy.
Kommentar: easier^easily^
Kommentar: As suggested, price pulled back from 0.382 of the recent bear wave and the 1HR 50EMA. Next few hours are important, if it can break this level we can tick another box on the potential reversal checklist.

snapshot
Kommentar: So far so good. It’s not going to maintain 25% in a few hours. IF this is a reversal we would expect to see the pull back we just had. The basic formation you want to see is:

Higher high followed by
Higher low followed by
Continue on higher

Without the retest of a pull back it generally gives less confidence that there is a bottom.

This is an example of that formation:
snapshot


It doesnt always happen, this is an example where it just kept going up:
snapshot


And this is an example of a recovery failing on the way down when it failed to make a higher high after the first pull back following the double bottom.
snapshot


This is where we are now on a reasonable 4 hour timeframe.
snapshot


Good strong impulse up. A down pin bar, which has a long tail showing the down trend was rejected (although this still has an hour to close). From here if we can get a new higher high in the next candle the TA provides additional support that a reversal is underway. That's not saying it cant break, just that a lot of the signals are very positive (at the moment).

The 1 hour looks even more positive, although the shorter the timeframe the less meaningful the TA.

I've gone in at 6650 (not the 7650 typo I put above) and I'm looking to add more. A reasonable trading strategy would be to wait for the next candle to close with a higher high (at least 7500+) and then wait for a pull back to enter. Stop loss would be around 5700 as we could still see a double bottom. Initial target 8.5k - 9.5k. We can watch for reversals around that area.
Kommentar: Still looking good. I continue to look to average in. Since the bounce I have gone in at 6650 and was waiting for a HL and LH formation on the 4 hour chart. The formation came but not in the format that I wanted because we had too much growth before the short pull back - so I held out.

I am looking at a couple of scenarios for my next buy, the best is as follows:

Some more growth up to around 8.5k-8.6k, which is the 4H 50EMA and 0.382 FIB of the 5th bear wave. I'll be looking for it to pull back from there and then find support at around 7.9k which is the down diagonal resistance (now turned support) or 7.4k, which is the 0.382 FIB of the last minor bear wave.

When I say support, I mean it hits near it and then gets a clear fast rejection or consolidates slowly over a couple of hours before seeing a new impulse up start to form.

Last trade was long term positional. Now I will start going in now with stop losses.
Kommentar: Chart for the above
snapshot
Kommentar: I'm not buying yet, I see bearish divergence forming on the 1HR RSI

snapshot
Trade ist aktiv: I made a small entry at 7975 with a tight stop at 7739. I am speculating that:

- We are in the 4th wave. Wave 4 can't contract past the 1st wave. So I have used that to place my stop.
- We are entering a bull flag. The breakout should be the height of the pole. That takes us to 9150, although this will change depending on when the breakout occurs. This coincides with the diagonal down resistance trend line.

Risk reward 5:1. There is a relatively hard resistance at the 1HR 50 EMA which I might choose to take some profits at. It's a relatively risky buy but I've controlled risk through sizing and the risk ratio is high.

snapshot
Kommentar: Above should say 4HR not 1HR 50 EMA:

"There is a relatively hard resistance at the 4HR 50 EMA "
Kommentar: My position closed out on the stop loss. Whilst it has moved up since, it is because of a different pattern. I had a clear trading plan, which I new was risky and so limited with position size and stop loss. Controlling downside means I sometimes miss out on upside, I'm therefore content with the outcome.

The original wave count posted above was invalidated because wave 4 ending up overlapping with wave 1. There's now a number of possibilities that could unfold. The main ones I see are:

1. We are in the middle of an ABC corrective pattern. This would see us revisit $7k or more likely $6k on the B leg.
2. We have completed wave 1 and are in the wave 2 consolidating phase.

Resistance: 4HR 50EMA
Support from either (to be decided):
- 1 HR 50 EMA or
- 7,300-7,500. Just above 0.382 of the bear wave, which converges with the 0.618 of the potential wave 1

I'm now looking for it either to consolidate into bull pendant (triangle) between the two 50EMA or a bull flag (rectangle) between 50EMA and just above 0.382.

Risk reward is not enough for me on the pendant. However, if I see the flag forming with a return to 0.382 (7,300-7,500) and a bounce back from that, I will be looking to go long again (potential 3rd wave 1-5). If I see a break below 0.382, I may sell some holdings looking for a retrace to $6k (B of ABC).

snapshot
Kommentar: This is setting up nicely for a possible entry trade. I'm looking for a bounce off of the top of the green support zone at 7600. Initial target is resistance around 8500 (also 4HR 50EMA). Stop loss is just under the previous low at 7200 / 0.382 Fib of the last leg Bear Wave 5. Risk Ratio 2.5.

It could just go up from here, but that doesn't meet my risk reward ratios.

It could also break the 0.382 fib and that would likely send us heading towards $6k or lower and so I'll be looking to sell off my 6650 coins at that point.

My aim is to buy back into what could be a reversal to bull market but do it with what I call localised trades which would still allow me to exit at a profit if the reversal falters.

snapshot
Kommentar: There is also potentially an Ascending Triangle forming which would provide an entry opportunity. I've created a new post for that.
Kommentar:
Kommentar: Looks like the asc triangle formation is more likely to happen so I'll be updating that post from here out.
I am looking at potential scenario(s) that *might* unfold that might allow me to consider a trade against my plan. These are my personal opinions and not advice. Please do your own research and plan trades that work for you plan.
My position closed out on the stop loss. Whilst it has moved up since, it is because of a different pattern. I had a clear trading plan, which I new was risky and so limited with position size and stop loss. Controlling downside means I sometimes miss out on upside, I'm therefore content with the outcome.

The original wave count posted above was invalidated because wave 4 ending up overlapping with wave 1. There's now a number of possibilities that could unfold. The main ones I see are:

1. We are in the middle of an ABC corrective pattern. This would see us revisit $7k or more likely $6k on the B leg.
2. We have completed wave 1 and are in the wave 2 consolidating phase.

Resistance: 4HR 50EMA
Support from either (to be decided):
- 1 HR 50 EMA or
- 7,300-7,500. Just above 0.382 of the bear wave, which converges with the 0.618 of the potential wave 1

I'm now looking for it either to consolidate into bull pendant (triangle) between the two 50EMA or a bull flag (rectangle) between 50EMA and just above 0.382.

Risk reward is not enough for me on the pendant. However, if I see the flag forming with a return to 0.382 (7,300-7,500) and a bounce back from that, I will be looking to go long again (potential 3rd wave 1-5). If I see a break below 0.382, I may sell some holdings looking for a retrace to $6k (B of ABC).

snapshot
Antworten
you mean resistance at 4H EMA or?
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monkia PRO evangel94
@evangel94, yes, thanks for pointing out. I've added a comment.
+1 Antworten
@monkia, Thanks keep on posting and doing great work :-)
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Excellent call! At the least, a beautiful bounce.

+1 Antworten
straightace PRO straightace
@monkia I am really impressed by the PRO momentum indicator. Any tips on how to use?
Antworten
monkia PRO straightace
@straightace, I'm testing it but to be honest it's not been much use so far. I haven't used it in any of my recent analysis or trades. The live version is different from the one Phil's uses in his video. A lot of the signal overlap between Sign and Momentum are confusing and the documentation isn't clear. He tries to help whenever asked but one doesn't want to keep bugging the guy. I think Phil is looking to address these issues over the coming week so I'll keep reviewing it until then.
Antworten
@monkia, I see, thanks for the insight. I had trouble reviewing the documentation as well. But for the hourly swing trade it seems an interesting tool.

Still HODLing ofcourse.
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I am still waiting to pull the trigger
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monkia PRO retiringsoon1
@retiringsoon1, I'd be interested to hear what formations/signals you are looking for. I've posted a potential entry I am looking for above.
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