Overview:

The bullish move in cryptos the past week may be the initial sign of a bottom.  As we mentioned in our podcast and in several articles already. Bottoming is a process not an event.  Sentiment turns from pessimism to optimism and back very quickly in these markets, as evident not only on the charts, but in the emails we received.  Did I miss my opportunity? Should I buy now? It is no different than waiting at the bus stop for the next bus.  You have to be patient and realize another one will come along.

In order for a behavior to become a habit it takes between two to 8 months.  New habits are easily formed, changing the behavior of a bad habit takes a longer period of time.  This is why we mention over and over again BE PATIENCE!  Buying impulsively and winning is the worst thing that can happen to a trader.

BTCUSD

Bitcoin Reversal

 

Monday afternoon Bitcoin was not acting correctly, it started showing signs of exhaustion so with our first swing trade target hit, we closed out the 2nd for an overall small gain.  There were several factors that went into this decision which is for another article, but the herd was overly bullish and this was evident in our surroundings.

Technically speaking this is a difficult position for Bitcoin, but it is acting as if it wants to move lower.  We are currently looking for a break of 3690 and a pullback into the main support zone between 3375 and 3550.

Markets change and we must be flexible to change with them, so this does not imply we wait for sub 3400 to issue a trade.  We just are letting the next few bars dictate order flow and provide a better idea of where the market wants to go.

Like broader trend changes are a process so are interim trend changes.  At a major support resistance level off a bullish swing anything can happen. This is where it is prudent to let the market show its hand not simply guess because it hit some magical level.

In an extremely bullish environment we often see a “V” shape correction, however we are coming off a extreme low so this reduces the probability of it happening.  We more likely see a 3 leg corrective cycle or extended flat pattern so it is not out of the question to see 4000-4200 during the process.

We are simply waiting for the market to show it’s hand as Marc mentions often.

 

 

Summary:

Recoveries take weeks or months to form especially after sentiment being at extreme lows.  Structure formation is like gathering evidence.  The more developed the structure, the more evidence we gain enabling us to trade with higher probabilities.  Just jumping in because of a divergence, crossovers, or other lagging indicators is silly and shows lack of understanding what this market and order flow is telling us.

Like waiting at the bus stop, waiting for the market to reveal its cards is boring.  However the patient trader is often rewarded with higher probability setups and long term outperforms the impulsive trader.  They also generally have capital in their trading account when more favorable conditions return.

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