BTCUSD: Is 9600 Support Low Of Next Swing?

23. Feb. 2018

BTCUSD update: Since the bearish pin bar off of the 11700 area price, has been retracing and has tested the 9600 level to produce a spinning top formation. This can be the beginning of the next bullish leg which can test the 11700 peak or higher. In order to justify a long position, I would wait for particular conditions to unfold first.

Maybe now you know why I locked in 15% of my position off the 11700 peak. I did not know for sure that price was going to retrace back to the 9600 area, but I saw the signs of selling, and recognized the potential. Now that price is finding support at this level (.382 of recent bullish swing), is this the time to start buying or adding back to my position trade?

It is too early to tell. A spinning top formation is not a reversal candle. It just indicates a potential change. On top of that, the candle has not closed yet which means it can still close bearish. There are many different formations that can occur at this location that can prompt for a new position, but each formation carries its own degree of risk.

For example, a spinning top close followed by the break of its high is a bullish trigger, but not the most reliable, which doesn't mean it won't work. Taking a trade like that all depends on your risk profile. Also this trigger would offer an attractive swing trade opportunity since risk can be quantified by the 9600 level. The short term target would be around the 11500 area which puts reward/risk at around 4:1 (assuming a 10K area entry).

A more conservative plan is to wait for a higher low formation, and/or close above the 10429 level (.382 of current bearish swing). By waiting, you get less attractive prices, but you are entering with momentum clearly in your favor. This is more appropriate for my position trade since I plan to add about 30% more. The target for this trade is the mid 13Ks to 14K area since it is looking to capitalize on the broader move. One advantage to having the position trade is even if there is no clear entry, and I never add, I am still long and benefiting from any bullish momentum that materializes. I am also willing to take the risks associated with this type of position as well.

By the way, I get a lot of requests to include wave counts on my charts. I am always aware of relevant counts, but show them on my chart when they are clear and offer insight rather than confusion. This situation offers that type of clarity with the current low fitting into a minor Wave 4 bottom. Which means this count is now inline with the broader bullish premise behind this market. This type of impulse wave, especially when the market is in a Wave 4, is the simplest and most effective way to use Elliott Wave in my opinion. Since 3 waves must be in place and adhere to the impulse wave rules, Wave 4 becomes the easiest wave to anticipate.

In summary, it is important to keep in mind that just because this market is showing the possible beginnings of the next bullish leg, it does not guarantee there will be follow through. IF this candle closes bearish (it can happen), especially below the 9600 level, the next possibility is a retest of the 8171 to 7239 minor support zone (.618 of recent bullish swing) which overlaps the broad support zone that I have been writing about for weeks. If price has trouble pushing the minor 10429 level, the bearish scenario becomes more likely. In this situation, I will wait for the lower supports to be reached and then look for broader reversal formations to add to my position. I am holding this trade for a broader move and willing to take the associated risks. I like to think of this as managing and building inventory until peak season, and this strategy will work as long as my long term premise holds true.

Questions and comments welcome.