BTCUSD - Managing risk in a key area

已更新

So far so good with BTCUSD. If you have been following my earlier post, you will see it has made gradual progress up to our key area between 11.5k-11.8k. In the last few hours it has been rejected twice and is currently on the third attempt. This could well just be a pause and consolidation before it breaks through, like we saw recently in the 11k and 11.5k areas. Normally if a price is going to reject a local high it does so pretty quickly (see 11.2k 18th Feb and 10.2k 16th Feb).

When reviewing my plan I like to look at the facts around the current pricing:

- Support at 10-10.5k and the 1D 50EMA (0.618 BrW5, 1.414ext on leg A/i, up diagonal TL)
- Resistance at 11.5-11.8k (0.78 BrW5, diagonal down trend, H&S projection)
- Resistance at 13k (Wave 4 top, 0.5 of bear wave support on way down)
- We are in wave 5 and are therefore due a reversal which would either be an ABC (moderate) or 5 wave (large back to 6/7k)
- Price is now overbought (70+) on RSI on 1HR, 4HR and 6HR and almost there on the 12HR.

The risk
To enter a trade now (11.5k) the stop loss would be set at 10k and the target would be set at 13k short term 20k long term. A sell would have 13k stop loss and short term target of 10k, with a long term target of 6k. In both cases the ratio short term is 1:1 which is high risk and both long term provide about a 2x.

The bears and bulls
Whilst in the short term the bulls have taken control, we are overall in a big bear run and until the bulls can break through this diagonal down trend line and the bear wave 4 top (13k), one would be remiss to say we are out of the woods. The further we move up toward the 13k, the better the risk reward for the bears become, particularly given we are due to finish wave 5 soon.

My plan
I have sold down 50% of what I bought in the bear run, averaging in at 8.5k and out at 11.4k. I have my long term core which I am not touching. I must manage risk on my trading pot. Until we have clarity on whether the bear run is over, the risk reward around this area really doesn't work for me. I will be looking to exit the remaining 50% at around 13k or earlier on any clear signs of weakness (e.g. double top or lower high on a meaningful 4-6HR timeline).

If we continue to blast through these resistance levels, I'll be looking to renter on a retrace somewhere North of 13k.

If we reject the resistance and retrace to around 10k I'll be looking to buy back in with a stop loss below the 9.5k resistance.

注释

Elliot Wave analysis can be tricky, particularly on the smaller sub waves. However, I have been looking at the current wave 5 and it looks like we are yet to top out at the wave (iii). If this holds, the coming retrace would be moderate due to being sub wave (iv). We have a bit to go until the next ABC / 5 waves, although depending on when (iii) finishes, this could line us up for a reversal around the 13k levels.

注释

Chart with the (5) moved....

注释

A scenario unfolding *could* be that we have just completed wave (iii) in the large wave 5 impulse and will be going down to form wave (iv) on the diagonal up support line before creating the final (v) leg up. You will notice a small H&S *potentially* forming, which would go down to the diagonal support line of the recent bear trend. RSI is showing some divergence on the 1HR TM.

My plan

I am anticipating a correction after these five waves, but my conviction is that we are in the 3rd or forming the 4th wave. I have taken profit on my earlier trades at 11.6k and willing to risk some of this for the right opportunities

This setup is unlikely to unfold but if it does materialise, it provides a risk reward that works for me and my plan. While the risk return is high (R5.6), the probability of hitting the stop loss is also relatively high. I will manage this high risk trade through small sizing and only initiate on a change of direction in this area.

A nice place for a stop is just under the diagonal up support line (10,600) which meets with the 1D 50EMA and some support/resistance from the recent waves. This is just below the wave (i) top, a close below which would invalidate the wave count.

The target would be the top of the diagonal channel at 12,500 which is below the key resistance area.

注释

I'm debating whether the minor correction we saw at 9am GMT from 11.6k to 11.1k was wave (iv). It made a 0.382 retrace on wave (iii) so it could well have been. It would be the same size of the wave (iv) in the the large wave 3 impulse. Anyone think differently?

*IF* that's the case, we are in wave (v) which will finish the large 5 wave impulse.
Next step is to move into a 3 or 5 wave retraction. This makes buying a retrace more risky.

交易开始

Buy, details to follow...

交易开始

The benefit of planning and thinking through trade scenarios *may* pay off here. I am comfortable on the major and minor wave count, we completed wave 5(v) at 11,800. It stopped right at the top of the danger area I was watching.

We are now in either an ABC corrective wave that will then take us onto a new 5 wave impulse up OR we have started a 5 wave impulse down. We may have just completed the initial A wave.

My plan
My conviction is that we have completed the A wave. Which would mean there's a short term opportunity to trade the B wave correction, which is what I have done (10,982). This is pretty risky as the A wave might not have completed and the target is not clear. However, my conviction is that we will retest for a double top, so that's my target (11,800). EW theory says its unlikely, but we could go higher. The stop loss is just below the recent (A) wave (10,650). Risk ration R:2.5

It's a risky trade so I will look to move the stop loss up as we move through the wave. In terms of sizing, I have gone back in with 50% of what I sold at 11.400.

注释

交易手动结束

Closed out with tiny 1% loss. My conviction is that the risk is now high that we are in an ABC corrective zig zag. More to follow shortly.

注释

I closed out at 10918 for a 0.6% loss. Two things promoted this:

1) Lower low on 1 HR time frame
2) I am concerned that we are in an ABC corrective Zig Zag. This has five minor waves in A, which I have labelled. Then 3 minor waves in B, also labelled. The retrace was 0.5fib of A, which is relatively common. This would mean the C wave down would also be about the same size as A.

I prefer to hold onto my cash and wait out trying to identify the bottom of the C wave which should then provide a more attractive opportunity and longer term trade. I'll update on this once we have more certainty we are in the C wave.