BTCUSD update: Price could not push through minor resistance of the 11871 to 12316 area and appears to be getting weaker once again following the establishment of yet another lower high. The price action is weak, BUT it must be considered in light of its location within the bigger picture. As long as it stays within this generally supportive area, minor pullbacks are potential buying opportunities from the larger time frame perspective.
When utilizing TA, it is not just about evaluating the most current price action that is unfolding for patterns and levels. It is also about considering that price action in light of the bigger picture. Many less experienced traders forget that part, and get sucked into misleading signals as a result. The other factor that must always be considered before assembling a scenario for a trade is the time horizon, day? swing? position trade? because that also affects what information carries more weight.
At the moment, the small picture shows a lower high off of a minor resistance area of 11871 to 12316 (.618 of recent bearish swing) and a possible triangle break to the bearish side. Isn't this a short setup? Sure, IF you are day trading, because this setup is occurring right into a major support zone that has not been compromised yet.
I am observing this market from the position trade perspective which means I am interested in broader structures and levels, like the 10534 to 8656 support zone (.618 of recent bullish structure). For me, the fact that price is still fluctuating in this area and not pushing below levels such as 9683 (written about in previous reports) means that it is not as weak as the immediate price action implies. For this reason, I am anticipating a bullish reversal within the support zone and a break of the 11871 to 12316 area rather than a retest of 8K.
Now keep in mind, I could be wrong. I have been doing this long enough to know that the market is always right. The best I can do is interpret price action, make comparisons, develop scenarios and then see which path the market chooses. My thoughts, feelings and opinions are irrelevant. This is why managing risk is more important than being "right" as so many less experienced participants naturally value more. So with that being said, IF this market does not show any reversal signs and pushes below the 8656 area with conviction, I will just hold my position trade and wait until the market finds stability before doing anything else. Since I am in this for the bigger picture, my carefully managed size keeps me out of trouble.
In summary, react less and compare more. Know what time frame you are looking to take risk on and weight information from there. For me, the big picture is in a descending wedge and forming a broad higher low, it is just a matter of catalyst before the next rally structure begins. I watched this market go to 1K back in 2013, and then pullback for 2 YEARS before it entered into the bull market that we saw more recently. As long as the general fundamentals of this space stay intact, I prefer to buy more, especially upon bullish reversal patterns within broad support zones. This is my perspective because I am in a position trade which aims to capture much broader market moves.
Thanks for the update Mark. I really enjoy your posts. Some of the best on TV!
I completely agree the bigger picture is a falling wedge which is bullish!
However, the short term I see some pain; ~8k
If you have any comments, they are greatly appreciated as I'm new to TA.
BRRD
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@crimsonr, it will be interesting to see how this drop pans out. I feel it should dig a bit deeper than the channel sooner or later as it still seems we are due a real capitulation-style drop. Most have been viewing this as a healthy correction so far but that simply means that really bearish sentiment is yet to materialise.
mrmeeseeks
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@BRRD, Good point. I see two options — either a SERIOUS drop below everyone's expectations (think 4k-6k range), or a rebound before everyones calls. If the herd has been calling 8k since the drop started, it ain't going to be 8k.
BRRD
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@mrmeeseeks, it's an interesting point to consider.
I believe the bearish sentiment only counts if it evolves in those with skin in the game (sounds obvious I know!). The recent Citibank calls for 4k or whatever don't count, for example, as bearish sentiment in the market (as Citibank don't have any position until they have a mandate to do so, which is not at the moment).
I've been teetering on the fence over this but I'm going to stick with my original view (view I came to just before Xmas 2017) for the time being, and according to that view we have yet to see a capitulation as sentiment among market participants is not bearish enough yet.
Generally speaking I think the turnaround in sentiment should accelerate at this point, but maybe this will be a slow, grinding, excruciating affair.
Bullissimo
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@mrmeeseeks, If the herd is calling 8k, won't the herd start buying once it gets to 8K resulting in a price reversal? In september everyone was calling 3k and sure enough it hit 3k but also reversed from that point. Might happen again...
BRRD
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@Bullissimo, if this is a real bear market in the making then by definition buying will be outmatched by selling. It is not the same dynamic as last September, important to keep in mind.
Bullissimo
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@BRRD, This might be true, but i see "BTC going to 8k" on a lot of media which influences buyers opinion. At this point many are expecting a sudden drop so lots of people are bearish and ready to leave the market, making it hard for BTC to recover. Small corrections are oversold, triggering even more sales. Once we reach 8k people will be relieved that "we finally hit bottom" and this will add confidence to the market and people will start investing again.
JackDu
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It is not a falling wedge at all, BTC is stepping into the bear market.
josephtse
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Very nice risk management, position sizing, and analysis. Doing a lot of right things here. If you're in it for 6 months or longer, then it's buy on the pullbacks anyway. The bigger moving average is providing support right now.
I completely agree the bigger picture is a falling wedge which is bullish!
However, the short term I see some pain; ~8k
If you have any comments, they are greatly appreciated as I'm new to TA.