BTCUSD update: Price has made a dramatic lower low at 7665 and is now right in the middle of the 8171 to 7239 minor support zone. Even though the short term momentum is now clearly bearish, it is very important to not lose sight of the location of this price action.
In my previous BTC reports, I wrote about quiet markets being a sign of possible strength, and about how it is better to wait for the market to show its hand and being prepared for the possible outcomes both bullish and bearish. Well the market has spoken. First by taking out the 8822 inside bar low, then closing below the 8659 reversal zone boundary and now testing the broad support zones that we have not seen for a while. At first glance, it looks pretty negative but when you consider some of the factors driving this sell off like Goldman Sachs and Google recent news, it is not hard to see that this is nothing more than overreaction. Bigger picture fundamentals have not changed.
For short term traders who are day trading or even swing trading, this is certainly a welcome move, if you have the ability and courage to short this market. As for position traders who are long, such as myself, I see no reason to sell. In fact in light of the recent spike in short interest, this market is in an ideal position for a dramatic fake out and squeeze. Short positions are piling on as price pushes into a major support zone? On top of that, the 7776 level is the reversal zone boundary relative to the 8342 swing low. Proportionally the current price location is the most likely place for a short squeeze to begin. In other words this is where the herd sells the bottom.
Now keep in mind, a fake out or reversal is not in play until reversal candles form, close and get their highs taken out. Just because we are in a high probability location does not guarantee that it will happen. Waiting for price to prove itself is what prevents premature trading which leads to trouble, especially on the smaller time frames. Right now momentum is bearish and it must be expected to continue this way until a change materializes and proves itself.
How you manage your decision making in this situation strongly depends on your outlook and time horizon. I am not day trading these markets, and secondly I am managing a long term position. I can't just throw out my long term outlook and change my entire plan because of a market over reaction. Like I wrote about in my previous report, I have accepted the risk inherent in this market which means I am not afraid to lose. This is what prevents me from getting shaken out during times like this while adhering to my bigger picture plan, especially since this market has not yet pushed below 6K.
In summary, look at this move for what it is and do not get sucked into the massive hype that looks to capitalize on it. As long as price stays above 6K, it is more likely to be range bound on the broader time horizons which is what carries more weight. Sure, short term traders who had the courage to get short 1k points ago look like a hero, but if you are not one of those traders, then NOW is NOT the time to start shorting. I have been writing for weeks about the possibilities of the market choosing a short term bearish scenario only to set up for a fake out, particularly at these levels. And when I see the right patterns, I will add to my long, because this is where bigger picture risk is relatively low. If price continues lower which is also possible, I will just hold on to what I have and wait. As long as nothing changes in terms of the broad fundamentals of these markets, this is nothing more than a buying opportunity engineered by the big money.
I consider you a very good and wise analyst, but yet I have to understand why you are still a permabull with Bitcoin. To me, it is pretty clear this is just the collapse of a bubble, like it happened in the past and like it will happen in the future many times. I'm expecting a 2018 bear market actually
Iruwen
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@atricoz, he's far from being a permabull. Some time ago people said "why are you always so bearish, go long already".
XLukaz
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@atricoz, from when? Are you like people who screem 1mln $ when is uptrend and bubble-end of btc when is downtrend?
tradespotting-za
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You are one of the only contributors that I actually read. Marc, I look forward to you posts on a daily basis. Thanks once again, you help me to stick to my mandate and are a rational mind every time I look at things and think hell maybe its time for a change. Really appreciate it man.
tj000b
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Dear Mark, once again thanks for sharing your deep knowledge of the field.
Can someone help me understand this part "...and get their highs taken out". Does this mean first we have to see a bullish reversal candle close, and then another candle close higher than the high of this bullish reversal candle?
MrRenev
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BTC rejects 11700 falls to 1500k instant "I'll short it if it goes to 11k"
BTC drops to 9500 "I'll short it if it goes to 10k"
BTC drops to 8500 "I'll short it if it goes back to 9500"
BTC drops to 7600 "I'll short it if it goes back to 8500 now's not the time to short"
BTC drops to 6600-6900 "I'll short it if it goes back to 8k"
BTC drop to 6000 "I'll short it if it goes to 7000"
BTC drops to 5000 "I'll short it if it goes to 6000"
...
BTC drops to 1000 "I'll short it if it goes to 2500"
If it's always ok to buy because the lower it goes the more you buy, why can't you short after a 10% bounce?
If it goes higher you simply short more.
I don't short myself but your scenario makes sense the way people think.
I don't understand people that have active long positions that are taking excessive losses. I'm not indicating MarkP is doing this by the way. I respect his analysis.
I dunno, I think a lot of people with excessive losses on an active long trade didn't have a more conservative loss prevention plan in place, a determined amount, and are ( now ) making plans to recoup it with a plan to buy more and with the very real possibility that they could get their ass beaten even more. Why do that? Instead of managing the loss they are now experiencing, they are planning yet another big long trade when the one they have going is not even working lol.
If someone doesn't want to exit with a loss plan it would make sense to day trade the many 5-10% swings upward which in turn allows you set your original long positions actual entry point lower, eating up your losses as you go. Shorting would accomplish the same thing. Lot of work I know, but if you have the time and skills just makes sense to me.
The way I see it is if someone really believes in the overall setup of it actually turning around someday, why not either make up the losses on the way down, or better yet just exit, suck it up, take the smaller loss, whimper and cry like I do, and re-enter when it actually does rebound. Otherwise on the actual way up, they are just gaining empty percentages instead of actual profits.
That said though, I think of the people back in the earlier years that were in the same position as those who bought in today at 13,000 - 17,000, and their very very bad entry point at the time, and the destruction they experienced, actually turned out to be a pretty good long term investment.
befunkt
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"I have accepted the risk inherent in this market which means I am not afraid to lose. This is what prevents me from getting shaken out during times like this..."
This is my new mantra. Thanks Marc!
Gamemaker73
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thanks for your insights & educational aspect , like this one more:
" this is nothing more than a buying opportunity engineered by the big money."
elikay770
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Thank you for the clear, level headed analysis. It's so easy to get caught up in the bearish short term price action & bail out of the market, only to get left behind when the market reverses. Your calm approach, no doubt helped by the lack of fear of losing are key ingredients, which few people, especially in this market, possess.