Bitcoin update: While this market is trying to build a bullish structure on the small degree, there seems to be unusual activity in some of the more prominent alts. What is going on here? Can these alts be the heads up for the massive Bitcoin squeeze that we have been so patiently waiting for?
First The Contrarian
We make it a point to monitor crowd sentiment in a number of ways. One anecdotal way is by comparing the popularity of articles on Tradingview.
Tradingview serves as a good representation of the herd mentality since it is so popular with retail traders and investors. The most popular Bitcoin article is looking for shorts. The majority of the top ranking Bitcoin articles are also more bearish. All this bearish sentiment while short interest continues to decline rapidly.
As a contrarian, I know it is better to bet against the herd. If the herd is generally bearish, that can be interpreted as a sign that the market is more likely to break higher. And Bitcoin is in position to do just that.
The other key piece of the puzzle are the alt coins. BCH has surprised the world with a hard fork announcement. The coin has since gone vertical. This type of fundamental surprise is not something you can discover from a chart. You have to be positioned (just like the insiders who conveniently bought into BCH when it looked it was going to 0 on the chart).
Other alts have also been showing unusual signs of strength. On our radar we have been carefully building small positions in WABI, BAT, XLM and XMR. The structure in these coins continues to improve. With this undercurrent of money flowing into the alt space, it can only serve as a foundation to support Bitcoin further.
DO NOT REACT
We operate under two separate mindsets. Short term and long term. We keep our strategies separate and is why we manage our portfolios differently from how we select swing trades. This is a very important organization technique that must be employed if you want to be successful in this game.
Why? It minimizes the need to react. If you have carefully managed long term positions, you will not miss the vertical spike when surprises come to light. At the same time, you are also exposed to shake outs, fake outs and other adverse movements that look to separate you from your investment. This is where the careful part comes in and why we enter our positions in partial units.
Meanwhile, by having a separate strategy for short term movements, you are out of the market (lower risk) waiting for setups. The goal is to capture short term momentum without having to be exposed to longer term risk. It requires a ton of patience, but is much less costly during broad adverse movements.
If you are only able to participate in one strategy, then STICK to its rules. If long term, you are simply holding and accumulating at particular levels that are attractive and predetermined. That means NO BUYING into the highs, ESPECIALLY on a vertical spike.
If you are short term, now that the bullish scenario is beginning to unfold, it is a matter of waiting for the next long set up. Either way there is NO BUYING HIGHS.
Environment: No Proof YET
We always write about letting the market reveal its hand. There have been many hints that lean bullish over the previous couple of months and now the result may be surfacing.
A close above 6400 on Coinbase is a good start. This break out can be the beginning of a move that can take price back into the 7Ks. If price gives this recent move back, that will point to a likely retest of the 6200 to 6100 area.
According to our plan for the bullish scenario, our next step is to NOW WAIT for a continuation pattern to get long. Again WAITING is key in order to prove that this move is not a another fake out to suck in reactive longs.
Won’t We miss the move by waiting??? If we had that mindset, we would have gotten long every time this market attempted to break above the 6450 area (bearish trend line). We also would have been stopped out NUMEROUS times. Don’t believe me? Just ask some of the more prominent “experts” how their active customers are performing recently.
New member? Read a recent Bitcoin analysis here.
If this is the beginning of the broader movement toward the 7Ks, THERE WILL BE PLENTY OF OPPORTUNITY. We will be watching very carefully for another swing trade entry into Bitcoin.
As far as the alts, we will continue to accumulate the ones on our radar. Even though BCH is putting on a show, technically it is still not exhibiting a long term bullish structure YET. On top of that, forks are only good for the insiders, we don’t really see this as a good thing for the ecosystem is general if these tokens are going to be used as some form of currency.
Keep your strategies separate, follow the respective rules and WAIT for the next setup. Reacting to situations like this are what lead to consistent account erosion, which is the real opportunity cost.
Questions and comments welcome.
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