BTCUSD: Higher Low Signals Buyers Are Back, But For How Long?

12. Feb. 2018

BTCUSD update: Higher low established at 7851 as current candle takes out 8570 which is the previous candle high. This candle formation signals on coming strength and serves as confirmation that the buyers are back in the drivers seat. I bought more at 8693.10 (Coinbase).

It is not about being right, it is about waiting for the market to conform to a predetermined scenario and having a plan of action for when the scenario unfolds and what to do if it falls apart. At the moment, the higher low formation is present as anticipated after the 8427 level signaled that this scenario was more likely. There are opportunities on two time horizons here: swing and position trades.

I bought more which I plan to hold as part of my position trade. The difference between swing and position is swing trading aims to define a target and risk on a more immediate move. The risk is defined by the 8069 low while the first target is 10350 which is in the middle of the next resistance zone and gives you a reward of 1650 and a risk of 700 (RR ratio about 2.3:1). That is the swing trade.

The position trade has no stop, and no target and depends on incremental sizing to manage risk. My average price is now 10,310. My plan is to start lightening up on the position IF the market starts pushing back up into the 13Ks at least. It is a big picture play and I intend to hold this position for a broader move.

The next resistance zone is 9887 to 10836 which is the .618 area relative to the most recent bearish swing. A compromise of this level and subsequent break of the bearish trend line opens up this market for the next broader move higher. As optimistic as this sounds, there is always a risk we must consider.

Fake outs happen all the time and this is why you must consider the bearish scenario in case it happens. A break below 7851 and this market is back in testing lows mode. That would cancel out the current higher low and I would steer clear until signs of stability return. Would I sell my position that I just bought? No, I will just not add anymore.

In summary, you must be prepared for when the market shows you the signs you have been waiting for. In my previous reports, I have been describing this long scenario over and over. When it appears, instead of hesitating or reacting, you just follow your plan. And this plan does not come without its risks, and I consider mine at all times. For me, when all the factors lines up and I can no longer come up with any more reasons to stay out, I have no choice but to go long. The market is presenting one of the formations that I have been waiting for at a level where bullish reversal are high probability. The way to choose to manage this opportunity is a function of your risk tolerance and your outlook. Without a general idea of what those parameters are, you should not take any trades until you define them clearly. That is a task that only you can complete.

Questions and comments welcome.