Overview:

Bitcoin continues upside momentum after a couple days of hesitation after we decided to close 2/3 of our position trade.  The move provides evidence that the market had more underlying strength than most thought.  This strength is what we have been following for a few weeks now, and though we reduced risk as the market hesitated, we can focus on our next trade setup.

Market psychology works in so many ways and we do not need to look any further than the TA’s that were once calling for 5k and lower who are starting to flip and turn bullish. I mentioned the other day where my buddy called me and was looking to buy here.  Just a couple months ago, he was telling me that his friend was calling for a 2500 low.

Herd Mentality:

This herd mentality is how and why the various extended corrections work with Elliott Wave.  The longer a level holds (which is in the case the 6k area) the more of the herd starts thinking, maybe Joe’s friend Tom whose Cousin Pete was calling for 2500 is wrong.  They start buying into the pullbacks which forms a higher low, which subsequently leads to a higher high.

We see this same mentality with the analysts once fear mongering the herd with their forecasting 5200 4200 and lower.  They are now flipping to the bullish side.  Other analysts, like Marc, Charlie Lee, Brian Kelly and myself, remained bullish in the long term.  All we can do during corrections is look for possible scenarios, support and resistance levels.  What happens in the short term is simply noise which is why we look to the broader chart for guidance. 

BTCUSD Weekly:

 

 

Nothing has changed on our weekly chart.  We are still looking for a bearish reversal in the low to mid 7k area.  The next pullback will provide a clearer picture of where we go from here.  A shallow pullback (shown in green) would provide validation that we completed the ABC correction and we can position for the 9k area.

A retest of the lower channel would provide evidence for the expanded correction.  There is also the possibility we rally from here similar to the April impulse wave.  As we mentioned earlier this is really a No-Trade Zone until we see some clarity.  We are simply looking at possibilities with a long term bullish biased.

Perfomance:

 

The past week laggards have started to outperform Bitcoin which is a good sign for market momentum.  The herd sees their portfolios recovering they are ready to jump back in.  Dash, which was one of the coins we mentioned in our portfolio management article, found life yesterday.  This was likely due to the partnership with Krypto Mobile announcement.  One of our speculative coins WaBi has rebounded significantly off its low. 

The point of this chart, which is a scaled down version of our portfolio management chart, is to show that the market overall is starting to pick up steam.  The next pullback will be telling as we are looking to see if these coins make higher lows, indicative of a bullish reversal. 

We will be making some changes with our portfolio shortly, but as we mentioned in our article we do not want to make any rash decisions as often underperformers become outperformers in early bull runs.

Timing the tops and bottoms is a guessing game.  We are looking for confirmation and in the near future, where the probabilities are in our favor, we will be adding to our long term portfolio.

Bitcoin Daily:

The push through the 6900 area needs to hold momentum with a close above 6960.  We have set our target for the 7200-7300 zone or 7500 area before we see a pullback and potential trade setup.  Failure to hold the 6900 level, which is current support, 6775 becomes support, and below this is where we can look for a trade setup.

We are looking to trade out of support not into the momentum, as wave 3’s are difficult to locate.  Is this wave 3 of the broader wave 5 impulse, or do we see one more retest of the low to mid 6k’s?

Impulsive Nature:

New traders often feel the impulse that they are somehow missing a trade.  They see the momentum, buy in, only to realize the trigger was in the 6700 area and those swing traders are looking to close positions.  The market was consolidating looking for direction and moved to the upside.  Momentum continuation trade.  Yet the position of the market overall makes this a higher risk trade. 

These types of trades can often result in a fake out.  This is why we are looking for higher probability trade setups into deeper pullbacks.  Keep in mind if this was a bullish market, this type of trade setup we would be  perfect for a continuation, but we are not yet in a bullish market.

Moving forward if the market starts making higher highs, these types of trade setups will be added to our trading strategy.

Summary:

As trigger happy as many are to be in the action at all times, this over time will result in reduced gains.  Over trading is no different then playing too many hands at the poker table.  There is a time to play 5-6 suited, and it depends on your position at the table.  Trading is no different, there is a time to take these types of trades, but we are not in the right position to do so.

You do not have to look any further than the forex traders that were shorting the Euro at 1.15 and were stopped out.  We not only need to see a valid position but a valid setup as well.  This provides a higher probability of success.  In the Euro case the position was right but the setup was not.

 

 

 

 

 

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