BTCUSD Update: New high made at 5420 which is just above the 5385 level which happens to be the 1.618 extension of the entire recent bullish swing. This is pure greed and euphoria in action, and for those who do not know yet, a hot market usually cannot sustain this rate of momentum.
I have been cautious up to these highs and I am staying away from any new swing trades in this market at these levels. Yes, new all time highs are certainly a bullish sign, but risk of retrace is way too high at the moment. Based on the current structure, the first reasonable level for a normal retracement is 4914 (.382 of current bullish swing). Price can retrace to this level and this trend would still be intact.
And the 4914 is a minor support, because the structure measured is the most recent swing. IF this level is broken, 4437 is the next reasonable level for a retest (.382 of entire bullish swing). This is the level is where I would like to see price stabilize and show reversal patterns for a possible swing trade opportunity. As long as price maintains this level, an attempt to retest the high would be within reason and worth taking the risk in my opinion (IF the market offers the opportunity).
The fact that price has gone up so quickly after working its way to the 5K level is a bearish sign because often this is when the majority of the "active" crowd is long. To be more specific, "majority of the active crowd" means the current population of investors who are trading in and out of this market regularly (which is a relatively small market) and when this crowd is mostly long, bullish momentum is likely to dry up. This is what I mean when I use the EXPRESSION "There is no one left to buy" which is not to be taken literally. The size of the candle on the larger time frames is what points to this condition.
People have been writing to me about being short, and this is a very tough market to outright short. One way to consider benefiting from a significant retrace would be to buy alt coins against BTC. In theory they should rise as BTC gets cheaper. This is an investment strategy which means buy and hold. I do not have any specific recommendations as far as which alt coins to choose, but I would say if you own alt coins, now would be a good time to add to your core positions since they will be cheap relative to BTC.
In summary, it will be interesting to see how investors behave after the forks are out of the way next week. As these markets mature, the coin relationships will change. Just like a month ago when BTC sold off, everything followed, and that relationship has slowly unwound, but that does not mean it won't come back. As traders we cannot expect anything (especially in these markets) to be fixed, or consistent when it comes to relationships. This is why technical analysis is so helpful because no matter what happens, price will still find support and resistance, it will still trend, and it will unfold in formations that offer some clues as to where price is more likely to go next. It is all a matter of evaluating new information and adjusting.
How do you think the upcoming fork affects prices here? It would seem that people are stocking up on BTC in order to obtain bitcoin gold.
dalmazio
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Taking a page out of @MarcPMarkets playbook, after the convincing price break past $5100, it is looking like we are in a wave 3 or wave 5 (difficult to tell which) of a broader wave 1 temporary bull. The correction will inevitably come, but it may have to wait until after Oct. 25 when the Bitcoin Gold fork occurs. People seem to be racing to the Bitcoin party in the hopes of getting free Bitcoin Gold, thinking it's the next Bitcoin Cash (I don't think it is). With all the euphoria, this price movement could potentially yield a Bitcoin price target near 6k in the short term. So I've entered a short-term long order with TIGHT stops, giving an attractive risk/rewared ratio of 1:7, before the long-awaited correction commences.
After the gradual upward price creep, I was able to raise my stops to my entry price, and now the trade is risk-free. As the price increases further, I will continue to raise my stops.
Just to be clear, this is not a long order, but an attempt to ride a bit of the Euphoria wave before a necessary correction.
Thank-you Marc for the great lessons on risk management in many of your previous posts.
d3ssy
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@dalmazio, Bitcoin Gold is moot point(less). 2x is where the real problem lies.
dalmazio
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@d3ssy, Tell that to everyone who want's to hold Bitcoin before the fork, so they can get free Bitcoin Gold. The market doesn't lie.
@MarcPMarkets, Cheers. But can't take all the credit. Just following what the charts are saying :-)
goldbug1
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Great article Marc! I especially like the "One way to consider benefiting from a significant retrace would be to buy alt coins against BTC . In theory they should rise as BTC gets cheaper. This is an investment strategy which means buy and hold." Thank you for the article.
Iruwen
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@goldbug1, that's usually not how it plays out, since most alts don't have fiat pairs. If Bitcoin retraces significantly, people move from alts to Bitcoin to fiat (or USDT/Tether). So there are multiple scenarios:
- if Bitcoin rises, alts suffer significantly against BTC and less against USD as people move to BTC, which obviously is a direct trading pair for almost all alts. That's what's happening right now.
- if Bitcoin is relatively stable, alts show major gains; Bitcoin retains its USD value in the process because the BTC/USD pair is hardly involved here, as all transactions happen within the crypto sphere. This is what's probably gonna happen next.
- it Bitcoin retraces significantly, alts suffer the hardest because people move to BTC and then fiat, which means alts lose value against BTC which again loses value against USD - absolute worst case. How hard it retraces depends on unpredictable external conditions, the minor retraces that happen all the time because people are trading by certain patterns or have a feeling of "this is too good to be true, time for a dip" are not worth the hassle of dealing with imo, so I usually just sit them out.
Iruwen
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@goldbug1, PS: rule of thumb, if much of the top 100 are in the red and USDT/Tether is in the green, shit really is about to hit the fan.