We had a remarkable bull run last time. In my previous analysis I mentioned it as a possible option with low chance of success, but bulls still managed to put up quite a show before ultimately failing. This only proves that a trader must be aware of all possible scenarios, be prepared even for the least probable ones, and have an exit strategy. Let's see how exactly the bulls did it and discuss your options as a struggling bear during such unexpected bull runs.
We had a 1200 move up from local bottom at 8350 just above the major 0.618 level.
Wave 1 consisted of a leading wedge (abcde), Wave 2 contained a (abcde) triangle that broke upwards producing a smaller triangle and another breakout upwards. The latter breakout met strong resistance at 9500 and was unsuccessful turning both into a fakeout, a pullback to 9150 and a major decline to 8400 a few hours later. This was a good setup for a possible up trend but bulls failed to kick start it.
This was not a trend from the start, because wave 4 quicky entered wave 1 territory and broke the up trend, transforming into a possible wedge.
Trends can begin with a leading wedge in wave 1.
A trend, once broken, can transform into such a wedge.
Wave 2 can form a triangle although this happens rarely (triangles usually form in wave 4 or B).
Triangles usually breakout in the direction of predominant trend of current wave degree (in this case up).
We also had a few confirmations of a future decline: RSI divergence, bearish Gartley pattern, low volume, huge sell walls above 9500 on several exchanges.
This shows that even a good trend setup will get bulls nowhere without buyers. And there are not a lot of them.
The goal of this bull run was to break the Double Top Neck line 9300 level. That's the red line for bulls, and they charge on red. Once broken it invalidates Double Top and a bearish move to 6800. Bulls have wasted your whole day trying to climb up, only to collapse in the end and make you a good 10% profit in just a few hours (if you shorted from top). That's more than enough to break even if you took a hit earlier. But you can't blame the bulls. They're fighting for their lives. No bull wants to go down to 6800 and get torn apart by bears to die a terrible death.
As a bear you had 4 options:
Bear Exit 1: take whatever small profit you can at the bottom of the current leg, don't ever wait for the next leg, because it can move against you. Small profit is always better than wasting your whole day only to get a loss. That's where scalper bears exit. They kill one bull or just find an already dead one, take his scalp and the most meaty parts and run away in the forest immediately.
Bear Exit 2: break even. Exit at the next 38.2% pullback at the first signs of reversal (Major Warning: leading wedge has formed, could be an up trend setup! And we're at major 61.8% retracement). That spike down to 9050 was the last resort for trapped bears to exit the market. That's where all seasoned bears exit. They place an order at 38.2% and it gets triggered, because a min 38.2% is usually required for another move up. And the wedge was seen clear as day from the start. Because they know that if they don't - they start to bleed and get squeezed out of the market by the bulls.
Bear Exit 3: exit with a small loss after another move up at the next leg's pullback. That's where all retail bears exit. They also wait for wave 2, but ultimately exit on top because there was no proper 38.2% wave 2, we had a contracting triangle instead, which one could spot only after its (d) leg. Which might scare some traders expecting a breakout even more.
Bear Exit 4: HODL through this bull run, wait for a decline and take profit at the bottom because you think it has a low chance of succeding. That's reckless and that's what only young bears do. It's not wise to hodl during a potential reversal unless you're playing on a larger timeframe.
If you're bear you must ensure your Bear Cave always has those exits!
We had a 1200 move up from local bottom at 8350 just above the major 0.618 level.
Wave 1 consisted of a leading wedge (abcde), Wave 2 contained a (abcde) triangle that broke upwards producing a smaller triangle and another breakout upwards. The latter breakout met strong resistance at 9500 and was unsuccessful turning both into a fakeout, a pullback to 9150 and a major decline to 8400 a few hours later. This was a good setup for a possible up trend but bulls failed to kick start it.
This was not a trend from the start, because wave 4 quicky entered wave 1 territory and broke the up trend, transforming into a possible wedge.
Trends can begin with a leading wedge in wave 1.
A trend, once broken, can transform into such a wedge.
Wave 2 can form a triangle although this happens rarely (triangles usually form in wave 4 or B).
Triangles usually breakout in the direction of predominant trend of current wave degree (in this case up).
We also had a few confirmations of a future decline: RSI divergence, bearish Gartley pattern, low volume, huge sell walls above 9500 on several exchanges.
This shows that even a good trend setup will get bulls nowhere without buyers. And there are not a lot of them.
The goal of this bull run was to break the Double Top Neck line 9300 level. That's the red line for bulls, and they charge on red. Once broken it invalidates Double Top and a bearish move to 6800. Bulls have wasted your whole day trying to climb up, only to collapse in the end and make you a good 10% profit in just a few hours (if you shorted from top). That's more than enough to break even if you took a hit earlier. But you can't blame the bulls. They're fighting for their lives. No bull wants to go down to 6800 and get torn apart by bears to die a terrible death.
As a bear you had 4 options:
Bear Exit 1: take whatever small profit you can at the bottom of the current leg, don't ever wait for the next leg, because it can move against you. Small profit is always better than wasting your whole day only to get a loss. That's where scalper bears exit. They kill one bull or just find an already dead one, take his scalp and the most meaty parts and run away in the forest immediately.
Bear Exit 2: break even. Exit at the next 38.2% pullback at the first signs of reversal (Major Warning: leading wedge has formed, could be an up trend setup! And we're at major 61.8% retracement). That spike down to 9050 was the last resort for trapped bears to exit the market. That's where all seasoned bears exit. They place an order at 38.2% and it gets triggered, because a min 38.2% is usually required for another move up. And the wedge was seen clear as day from the start. Because they know that if they don't - they start to bleed and get squeezed out of the market by the bulls.
Bear Exit 3: exit with a small loss after another move up at the next leg's pullback. That's where all retail bears exit. They also wait for wave 2, but ultimately exit on top because there was no proper 38.2% wave 2, we had a contracting triangle instead, which one could spot only after its (d) leg. Which might scare some traders expecting a breakout even more.
Bear Exit 4: HODL through this bull run, wait for a decline and take profit at the bottom because you think it has a low chance of succeding. That's reckless and that's what only young bears do. It's not wise to hodl during a potential reversal unless you're playing on a larger timeframe.
If you're bear you must ensure your Bear Cave always has those exits!
评论:
Forecast: I think we're in wave C (5 waves) of a bearish ABC correction with target 6800. Bearish scenario still stands. To form an up trend we would need to break above 9600 resistance with a huge Wave 3 on high volume to make space for a proper wave 4 correction which doesn't seem probable. We will break 9500 and go down. Just another day wasted by the bulls with 10% profit for bears at the end. We could also enter a trading range 8400-9500. Breaching 8350 will confirm bearish scenario.