BTCUSD update; Bearish candle leads this market right back into the middle of the broader support zone of the 10534 to 8656 area. This area is overlapped by minor support and reversal zone boundaries. The key to timing this is waiting for the supportive price action to return.
First, I am long and intend to stay that way because that is part of my plan. This is not a swing trade, but instead a position trade which I have written about in previous reports. This means I manage the position without stops or targets, but it also means that I control risk through careful sizing. Since I am relatively small, I am not emotional to adverse moves, especially if price spikes which often looks dramatic and shakes people out. Positions like this require a belief in the big picture and no positions taken on margin. By being 1:1 with the market, I can average into the position further, in a fractional and strategic way.
As I wrote about in previous reports, things change. Previous bullish signs can appear, like they have, but no follow through like everyone has become conditioned to expect after trading in "easy", euphoric vertical markets. Lack of follow through is typical of a range bound consolidating market. In order for the next rally to take this market out of this condition, a bullish catalyst of some kind needs to materialize.
In situations like this, it is important not to lose sight of the bigger picture. In this scenario, it is possible for price to retest the low which I wrote about in my previous report and described it as the "failed low" formation. This is where price can go slightly lower, and then fake out. Often this is accompanied by a pin bar or engulfing candle. There is no guarantee that this WILL happen, it is a matter of waiting to see IF it happens.
What we have at the moment are great prices for bigger picture longs, but momentum has shifted back to bearish. Keep in mind a retest of the low can go as low as the 8656 area which is the lower boundary of the broader .618 support zone that has been holding price up for a number of days. Until momentum shifts back to bullish, one way to participate in a market like this is to place limit orders deep outside the market to try and take advantage of any price spikes. This must be done small and carefully in order to mitigate risk in case of a deeper correction.
In summary, anticipating market moves means positioning yourself when things don't look obvious. As long as price can manage to gyrate within the current support zone, I will look to add to my long when signs of bullish momentum return. If price collapses, I simply do nothing except look to add on an extreme price spike. Reacting to the bearish momentum by going short is a high risk game just like buying near the top when the market is making relentless highs, this works for short term strategies such as day trading which is not what I am employing in this market. By the time bullish momentum appears and takes the market much higer, that will be an opportunity to start locking in some profits as all the reactionary traders enter the market. Back in December when the futures started trading, I wrote about anticipating "balance" which means tighter and more realistic ranges which is exactly what we are seeing. The levels are still attractive, and the bigger picture outlook is still intact, it is just a matter of a new short term driver or catalyst to reverse this market for a broader move higher. Positioning for such moves requires a lot of patience and ability to keep risk under control which I do by careful sizing.
Questions and comments welcome.
Special announcement: Today at 1PM EST I am going to appear on Nasdaq's Twitter feed in a live interview. Now, keep in mind, the first time I did this interview, they told me this information and changed it when I got there, and it did not come out until the next day. So IF they follow through with their schedule, I should be on today: twitter.com/nasdaq
You said that futures market brings balance and a way for people to short the market
Can you explain some specific tactic that the Futures might affect BTC ?
Thank you
cashvo
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@Shakesbear, Nice! I was just about to post the link too... ;)
DrJLT
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@Shakesbear, if you short on an exchange, you have to buy it back. you can just wait for the settlement date on the futures market. this means if you want to manipulate the exchange, you can do it more aggressively
Shakesbear
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@DrJLT, okay that make some sense. So there is no buying back, therefore adds more strength to the bears. But by the same token, lets say someone shorted 500 btc on the futures. There is also no selling of that 500 btc in the open market neither. It's not like someone shorted 500 btc in the future and at the same time there is 500 btc being sold on all the exchanges.
I'm missing something here.
Can you explain a little more.
Thank you
DrJLT
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@Shakesbear, the same person that shorts futures shorts on the exchanges of course.
so there is some degree of manipulation. we can use future's market to see how the real market is going to behave.
DrStein
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You say that "In order for the next rally to take this market out of this condition, a bullish catalyst of some kind needs to materialize". I totally agree, but the only certain bullish catalyst in BTC market is a drop to a strong support level such as the 8K range. BTC used to rise and fall all the time but since the futures came this oscillation seems to be "controllable" but not by the vast majority of traders and investors. The big players achieved to drive this ride and decentralization is almost vanished. Even the exchanges are in the game and bots are everywhere. This week I think that the situation will be more clear and lets hope that a big move will happen. Till then...good luck to all. Thanks for your analysis.
josephtse
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I think path of least resistance is down, and I think to continue to short any quick pops. Trend has clearly turned from bullish to bearish, and bitcoin is still too pricey here and still up a lot from November. I think the only attractive price from the long side are 8000 and below. 12,000 becomes a very easy short, and you should expect $5000 within the next 3-6 months. That means still, price favors the downside and any short squeezes should be re-shorted until the descending wedges converges to a singularity, which it won't until April.
JAYYORTINI
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Great interview with Nasdaq Marc. Thanks!
Earthquakejake
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Nice Analysis Marc!
I'm a little on the Fence because of a potential $730+ million hack at Coincheck exchange in Japan. (Nothing has been confirmed!!) If it proves true, might turn into a pretty ugly scenario for a while when people start panicking...
Here is a link to the interview. You look great.
You said that futures market brings balance and a way for people to short the market
Can you explain some specific tactic that the Futures might affect BTC ?
Thank you