Bitcoin - The Best Offense Is A Good Defense! Sale Denied!
Well we may have to cancel our reservations this weekend for the BTC ATH party! After an amazing rally which blew through resistance after resistance level, finally market smart money decided enough was enough and took profits.
The hype was wide spread and the Lambo dealer was full of Bitcoineers picking out the color of their brand new car. SALE DENIED The frenzy of the herd feeding into the hype as post after post was "13k going to 16k, "wait I have 20", "your nuts I have 30", "heck no its 60k or bust. It was almost a competition of who could put the highest level on their chart.
Well reality has now set in and those late to the game are feeling the pain and it was not the large operators. It was the herd looking for confirmation that somehow this rally could continue to infinity and beyond without taking a break.
This was the perfect example of Confirmation Bias. In lieu of looking at the evidence from a neutral position and instead of playing it safe, they got greedy. Instead of playing defense with their money recognizing the area Bitcoin was in, they were thinking "This Time Its Different!". You think those that were calling just weeks ago for a retest of the lows were selling or buying here?
OHH sure they all got out just in time. But what if you couldn't get on the exchange? Two exchanges were overwhelmed and traders could not get in. It's their fault right? NO it's yours for putting yourself in a position to be at the mercy of an exchange. How was that slippage?
Don't blame the whales or exchanges, it was your fault for not being defensive.
Technical:
We are making the assumption wave 1 is finished of a broader move. Though we do not expect this to be a deep correction we do not discount it. This may take a week or so to play out, and Bitcoin may likely range between 9500-13500 during this time.
Initial support is found at 9800 or just under 10k. The 10k level is a psychological level and if it can hold, we may see Bitcoin range between 10-14k. However if it folds, we could see a brief dip back into the mid to low 8k area.
I slightly adjusted my next major level to 27,500 initially. We have had 24k on there for months, and as the market develops we adjust accordingly. Nothing is set in stone, and this is only a guide to positioning. As the market continues to develop and provide more information we will adapt with the market.
With the market pulling back, the 20k party on hold, and lambo orders being cancelled there is nothing to do but wait. We will now wait for an opportunity to reveal itself, not force trades here. We are looking to buy this dip and because we played defense, we have the capital to take advantage of the market.
Where's the Buyers?
So who was buying here? Maybe it was some larger operators front running the future release of Bitcoin trading on platforms like E-Trade and Ameritrade. This could be true potentially those with insider information are front running the release. We can not discount it, and if we see these platforms make an announcement the market is likely to go vertical.
My thoughts it was probably the numerous "experts" all trying to out do the next with higher and higher levels like the move was not going to pullback. You know the same guys that were calling for a retest of the lows only a month or so ago.
Larger operators were likely selling or hedging not buying into the FOMO. Just because the gurus on TV and FB were buying into this swing, posting ridiculous levels without a pause, does not imply institutions were. They play defense, not offense, because defense wins games. It's like golf, you drive for show you putt for dough! What good is it if you drive 350, only to pitch into the sand, and 3 putt? You are still over par.
Hot Hand Fallacy:
I wrote on this in my recent "Hot Hand Fallacy" article, as to the reason most lose during periods like this. A trader has a run of good trades, they think they are in control of the outcome, the get larger positions, risking more and more capital only to give it all back. "The Big Short" explains this very well, and if you haven't seen it you should.
Any poker, craps, blackjack, hockey, basketball, football or baseball player experiences the "hot hand" at some point in their life. Many times while playing poker, basketball, soccer, or even golf, I have had a run where I just can't miss. If you do not have the emotional control to discipline yourself, this can be more of a detriment than a slump.
Many probably do not remember the "Miracle on Manchester". I bet it formed much of how Wayne Gretzky played for the rest of his career. Most do remember Super Bowl LI where the Falcons got complacent and let their guard down after being up 28-3 at the half. Same goes with trading. You get cocky, start to position to big, and take too many trades. Your feeling on top and the others around you are confirming your emotional bias so you break the rules. We have all done it, but to be successful in trading you have to recognize these emotional tendencies are real and not get caught up in the euphoria.
Defensive Mode:
We mentioned this past Sunday that there was a long setup and we issued the trade. It was aggressive but we have rules to limit our capital exposure. It was successful, but this came after a trade we blew out the week before. Even though we blew it out and it went on to hit both targets, we were in defensive mode. Our rules are, any sign of weakness we blow it out. We stuck to our plan and the result of both trades was an overall profit.
No matter how good your offense is, if your defense sucks, so will your returns. What good does it do putting 28 points up on the board if you look at the end of the game and 34 were scored against you? NONE! It is a loss and that is why it is important to have a good defense.
Building good defensive habits also removes stress and anxiety from the game. We have been sitting in a 20-30% cash position for weeks waiting. For an investor this is our defense. The best buying opportunity in the world does not matter if you do not have cash to take advantage of it. It also allows us to sleep at night.
Sure we may have to add a position a little higher than we could of, but eventually the rooster will come home to roost, and defense will save us from a devastating hit. You are never going to get out right at the top, and you are never going to buy right at the bottom. You do not have control over the markets, the exchanges, or that whale. You do have control over how you manage your risk.
The hype was wide spread and the Lambo dealer was full of Bitcoineers picking out the color of their brand new car. SALE DENIED The frenzy of the herd feeding into the hype as post after post was "13k going to 16k, "wait I have 20", "your nuts I have 30", "heck no its 60k or bust. It was almost a competition of who could put the highest level on their chart.
Well reality has now set in and those late to the game are feeling the pain and it was not the large operators. It was the herd looking for confirmation that somehow this rally could continue to infinity and beyond without taking a break.
This was the perfect example of Confirmation Bias. In lieu of looking at the evidence from a neutral position and instead of playing it safe, they got greedy. Instead of playing defense with their money recognizing the area Bitcoin was in, they were thinking "This Time Its Different!". You think those that were calling just weeks ago for a retest of the lows were selling or buying here?
OHH sure they all got out just in time. But what if you couldn't get on the exchange? Two exchanges were overwhelmed and traders could not get in. It's their fault right? NO it's yours for putting yourself in a position to be at the mercy of an exchange. How was that slippage?
Don't blame the whales or exchanges, it was your fault for not being defensive.
Technical:
We are making the assumption wave 1 is finished of a broader move. Though we do not expect this to be a deep correction we do not discount it. This may take a week or so to play out, and Bitcoin may likely range between 9500-13500 during this time.
Initial support is found at 9800 or just under 10k. The 10k level is a psychological level and if it can hold, we may see Bitcoin range between 10-14k. However if it folds, we could see a brief dip back into the mid to low 8k area.
I slightly adjusted my next major level to 27,500 initially. We have had 24k on there for months, and as the market develops we adjust accordingly. Nothing is set in stone, and this is only a guide to positioning. As the market continues to develop and provide more information we will adapt with the market.
With the market pulling back, the 20k party on hold, and lambo orders being cancelled there is nothing to do but wait. We will now wait for an opportunity to reveal itself, not force trades here. We are looking to buy this dip and because we played defense, we have the capital to take advantage of the market.
Where's the Buyers?
So who was buying here? Maybe it was some larger operators front running the future release of Bitcoin trading on platforms like E-Trade and Ameritrade. This could be true potentially those with insider information are front running the release. We can not discount it, and if we see these platforms make an announcement the market is likely to go vertical.
My thoughts it was probably the numerous "experts" all trying to out do the next with higher and higher levels like the move was not going to pullback. You know the same guys that were calling for a retest of the lows only a month or so ago.
Larger operators were likely selling or hedging not buying into the FOMO. Just because the gurus on TV and FB were buying into this swing, posting ridiculous levels without a pause, does not imply institutions were. They play defense, not offense, because defense wins games. It's like golf, you drive for show you putt for dough! What good is it if you drive 350, only to pitch into the sand, and 3 putt? You are still over par.
Hot Hand Fallacy:
I wrote on this in my recent "Hot Hand Fallacy" article, as to the reason most lose during periods like this. A trader has a run of good trades, they think they are in control of the outcome, the get larger positions, risking more and more capital only to give it all back. "The Big Short" explains this very well, and if you haven't seen it you should.
Any poker, craps, blackjack, hockey, basketball, football or baseball player experiences the "hot hand" at some point in their life. Many times while playing poker, basketball, soccer, or even golf, I have had a run where I just can't miss. If you do not have the emotional control to discipline yourself, this can be more of a detriment than a slump.
Many probably do not remember the "Miracle on Manchester". I bet it formed much of how Wayne Gretzky played for the rest of his career. Most do remember Super Bowl LI where the Falcons got complacent and let their guard down after being up 28-3 at the half. Same goes with trading. You get cocky, start to position to big, and take too many trades. Your feeling on top and the others around you are confirming your emotional bias so you break the rules. We have all done it, but to be successful in trading you have to recognize these emotional tendencies are real and not get caught up in the euphoria.
Defensive Mode:
We mentioned this past Sunday that there was a long setup and we issued the trade. It was aggressive but we have rules to limit our capital exposure. It was successful, but this came after a trade we blew out the week before. Even though we blew it out and it went on to hit both targets, we were in defensive mode. Our rules are, any sign of weakness we blow it out. We stuck to our plan and the result of both trades was an overall profit.
No matter how good your offense is, if your defense sucks, so will your returns. What good does it do putting 28 points up on the board if you look at the end of the game and 34 were scored against you? NONE! It is a loss and that is why it is important to have a good defense.
Building good defensive habits also removes stress and anxiety from the game. We have been sitting in a 20-30% cash position for weeks waiting. For an investor this is our defense. The best buying opportunity in the world does not matter if you do not have cash to take advantage of it. It also allows us to sleep at night.
Sure we may have to add a position a little higher than we could of, but eventually the rooster will come home to roost, and defense will save us from a devastating hit. You are never going to get out right at the top, and you are never going to buy right at the bottom. You do not have control over the markets, the exchanges, or that whale. You do have control over how you manage your risk.
Note every pullback in wave 3 was 30-40%. A 35% correction would fall between the 38.2 and 50% retrace levels. Again Fibonacci is only a guide not a crystal ball which is why we look for confirmation with other evidence.
There is also some discussion about this being a broader correction leg B. This is a possibility and like Fibonacci is subjective to the analyst, it is not set in stone. There are only 3 rules in EW, 1) wave 3 can not be the shortest. 2) Wave 4 can not pull into wave 2 3) wave 2 can not retrace more than 100% of wave 1.
What had us go long the last two swing trades was the structure of B shown below more of a corrective nature than an impulsive one. Here wave B surpassed wave 3, and as you can see it formed a failed high. Failed highs are often wave B''s that extend beyond the previous wave and suck in longs only to blow them out.