Bitcoin: Failed High Hints Toward 8500 Or Lower?

2019年6月19日

Bitcoin continues to linger above 9K while the 9500 reversal zone boundary is still in play. As I constantly remind our followers, short term timing strategies like swing trading rely on probabilities. We measure these probabilities in the form of price patterns and levels. When price reaches a reversal zone, and does not take it out, there is a greater chance of a failed high formation.

A failed high is a variation of a double top. It occurs when price goes slightly higher than the previous high (in this case the 9K area) but not much higher. This type of price action lures break out traders along with those who don't know any better. Buying highs works until you get caught and since the majority of the herd has no way of defining their trades, they let hope take over instead of getting out with a small loss.

Based on our perspective and process, the risk of retrace continues to be greater than the short term potential reward at this point. Although we remain long term bullish, we have NO PROBLEM standing aside and WAITING for a correction of a larger magnitude to unfold. If Bitcoin does not correct here and finds the motivation to squeeze higher, we have NO PROBLEM letting it get away. Why? Because we run multiple strategies and own inventory with an average price of 3900. Risk is what governs our decisions, not action, the need for attention or even profits.

A larger magnitude correction at this point can take price back to the 8500 level, or even the 8200 to 7800 area. This would be a normal and healthy retrace, while an extreme pull back would be the 6700 area. It is important to understand that even though we anticipate a correction, we don't expect it to be overly dramatic and instead are looking for a "corrective consolidation". Why? The broader trend is bullish and corrective movements tend to be more on the slow and flat side, not harsh.

The primary objective of our swing trade strategy is capital preservation. It is this focus that has allowed us to build a consistent and profitable long term performance. This means it is the rules and guidelines that we follow that generate a positive outcome, NOT making up trades for the sake of being "in the next move!". This also means we may not have a trade idea for a week or two. People who do not understand this will eventually learn a harsh lesson from the market, just as we did when we were inexperienced.

The environment we are seeing right now is perfect for day trading and in order to capitalize you REALLY need to understand the difference. Day trading allows for tight stops (along with tighter targets). This means if things turn fast, your exposure is much more limited. What new traders do not realize is day trading is also the hardest way to go about navigating any market. It requires the MOST attention, the MOST baby sitting and the MOST decisive rules based process. If you do not have these prerequisites, then you will find yourself with an empty account very quickly.

In summary, although Bitcoin may be holding up, it still lingers in a vulnerable location. The risk of a broader correction outweighs the potential reward based on our particular set of rules. What you have to remember (AND ACCEPT) is that MISSING A MOVE COSTS NOTHING. We would rather be wrong and NOT LOSE than be wrong and LOSE. It is this philosophy that allowed us to maintain our performance and inventory throughout the ENTIRE bear market that we saw conclude about 6 months ago. And as a result, we had a very small hole to climb out of while everyone else pretty much lost about 80% or more (which they will not admit). I cannot reiterate this enough: It is patience that makes money, NOT chasing. Everyone has the capacity and understands the idea of patience, yet MOST people cannot put it into practice.