Bitcoin: Waiting For Long Setup 8400 AREA.

Bitcoin consolidating again after the dramatic short squeeze to the 10,200 area. In fact, there is a sell signal in place as I write this, but is Bitcoin a short? Those that can appreciate my analysis and perspective know that answer to that, while everyone else chases 5 minute charts. In this article, I will update the relevant levels in play and what we are looking for in order to enter a new swing trade long.

Don't get caught up in the "WHY!?", because all that really matters is "WHERE". And to recognize high probability locations, elements like magnitude and trend need to be defined clearly. I was consistently writing about the high probability of a short squeeze while Bitcoin was gyrating in the 7Ks, and pointed out a lack of trend.

In order to put that statement into perspective, you need to understand how I am defining trend. My definition is derived specifically from the daily time frame, along with guidelines that come from the Elliott Wave frame work.

1. Our strategy defines trend as follows: 3150 to 14K is larger degree Wave 1 (BULLISH), 14K to 7295 Wave 2 (Corrective consolidation of a BULLISH broader trend). Even though price was pushing lows within the consolidation (9300 break to 7293) this is still part of Wave 2 which on the larger magnitude does NOT qualify as a bearish trend). This broader perspective offers insight into the probabilities of a location and why the HERD gets caught off guard shorting into fake out zones.

2. 7293 is a higher low relative to 3150. This is now a major support level and defines the broader Wave 2 low. Higher lows often lead to HIGHER HIGHS.

3. The magnitude of the short squeeze to 10,200 is a typical impulse that usually defines the initial wave of the next broader move. In other words, this could be the first leg of a broader Wave 3. According to Elliott Wave Theory, Wave 3 is NEVER the shortest wave.

4. With the initial impulse in place, the current minor consolidation is nothing more than a corrective wave (minor Wave 2) that can technically retrace to the low of minor Wave 1 (7295) and still be considered bullish. We are anticipating a reversal around the 8472 to 7974 minor support zone. It is this support zone that offers a high probability location for SWING TRADE long setups.

5. Although a Wave 2 low is established, the overall range is still the 14K high to 7295 low. This means we still operate under the guidelines of a RANGE BOUND market, UNTIL the shorter term trend is confirmed (14K needs to be taken out). Range bound guidelines affect how we evaluate risk and profit targets.

6. Momentum and trend are SEPARATE elements. You can have bullish momentum in a bearish trend, and vice versa. Even though there is a sell signal (current bearish candle) the short term momentum is still bullish. Unless you are day trading, shorting this market is a very high risk proposition.

It is important to comprehend that we refrain from day trading Bitcoin. Yes there will be countless trends, chart patterns and signals on smaller time frames, BUT the randomness is VERY HIGH. Where many go wrong is they take day trade signals and expect swing trade profit targets (which is the equivalent of gambling). This is what lures bears into shorting around 7630 and setting profit targets at 6500.

Those who chase are the ones who provide liquidity (and profits) to those who have the ability to WAIT. The weeks leading up to the squeeze required a ton of patience because there was very little reason to trade during that time. We had a swing trade on from 8425 that got stopped out once Bitcoin broke 7630. We took our small loss and simply WAIT for the next high probability SWING TRADE setup.

Many get caught up in smaller time frames because they offer a lot more action (more signals, etc). There is nothing wrong with that as long as your strategy is SPECIFICALLY developed for such time frames. We avoid small time frames and FOCUS on the bigger picture because we are involved in a variety of other markets (stocks, forex, cfds, etc.). As someone who is starting out, it is a good idea to focus on one market, so that you may learn the basics of timing.

Once you develop a solid understanding, then you can trade ANY market because order flow is order flow, no matter if you are in a stock, a futures contract or Bitcoin. And with the availability and easy access to other markets today, there is no excuse NOT to be applying timing strategies to wherever opportunities appear.