Bitcoin continues to push through 6K which should not be a big surprise. Not only have we been covering this move for weeks, but Andrew even boldly announced going long at 5100 live on our podcast. Meanwhile the alts are not participating which has lead us to close our Litecoin position. What is going on here? This unusual behavior may be a result of Binance seeing a lot of withdrawal activity thanks to a recent hacking event. Either way, if you own Bitcoin there are two things to consider right now: hold for higher prices? or take profits?

Higher High Confirms Strength.

A combination of positive news events coupled with an unusual amount of short interest has come together to produce what we are seeing in Bitcoin right now: a higher high. The fact that Fidelity, Etrade and Ameritrade are going to provide the ability to trade these markets on their platforms means the potential for new money to pour into these markets is enormous (which translates into “ginormous” for the younger readers out there).

These brokerage houses open the flood gates for the more mature and traditional investor. This money is not any smarter than the super emotional and ignorant Millennial money of yesteryear, but there is more of it. A lot more and like I wrote recently, new money means stronger and more persistent trends.

Meanwhile. the current herd continues to get more short. Go on the internet forums, Facebook and Tradingview. The majority of analysts are still calling for shorts. I keep seeing charts that show Bitcoin going to a new high, and then back to 4500, or back to 3500 or some other arbitrary number.

Simple fact: A market that produces higher lows and higher highs usually goes higher. Let’s evaluate the Bitcoin chart based on what IT’S telling us.

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Since the spectacular short squeeze that blew through the 4150 resistance, Bitcoin has NOT tested ANY major support levels. Before the squeeze, we were writing over and over that a close above 4500 changes the broader technical structure from range bound to bullish. And here we are at 6K.

The 5200 to 5800 resistance zone was significant and price attempted to sell off, BUT the selling activity was pale in comparison to the previous bearish momentum that we saw over the previous year. The fact that price lingered in the resistance zone, rather than selling off decisively was a major sign of strength and we documented this, along with the short interest evaluation the entire time it was gyrating within the resistance zone. Just go back and take a look at the charts we were posting in our chat rooms.

Short Squeeze, But How Much Longer?
6K broken, but parabolic? Let's be realistic.

As Bitcoin continues to climb, it is important to be realistic about the risk of retrace and be aware of the most relevant support levels in play. The 6130 area is a major resistance. Why? If you look back to October of 2018, price spent about a month consolidating there. Theoretically, that means there is a large population of investors who got long, anticipating a bottom, who watched the rug get pulled from their position.

These investors will be very happy to exit those painful positions IF the market gives them a chance. This feeling of being “whole” again is what will stimulate more selling pressure at such a level. This phenomenon is what creates the tendency of old support becoming new resistance and vice versa.

If price experiences such weakness, how much should it reasonably correct in order to still be within the constraints of a “healthy” bullish trend? At the moment 5400 is the next relevant support level to watch for and IF that is taken out, the 4950 is the extreme low. A close any lower than that can throw the short term trend into question.

What Type Of Trade Are You In?

Now do not misunderstand. I am not bearish. It is important to be realistic, especially when the hype in this space ranges from one extreme to the other simply to attract attention.

Many of our followers are asking: should I hold or sell here? And that is not a question that we can specifically answer. As Andrew has been pointing out, it all depends on your unique situation. For longer term investors, selling at the current highs is not worth the tax liability, while shorter time frame traders may want to lock in partial profits to reduce the risk associated with their type of trade. Since I am very short term oriented, I am a big believer in taking partial profits when the market offers the opportunity.

Don’t forget that selling at the precise top or buying at the precise bottom is a game for amateurs and gamblers. Can Bitcoin push through 6150? Sure, ANYTHING can happen, but the further it squeezes, the greater the chance of a retrace. There is no need to be emotional, or dramatic. Evaluate your own personal situation and answer the question: is your trade long term or short term? Over the long term, Bitcoin is likely to test higher prices, but it is not likely to go that way without any shorter term corrective movements.

One other thing to think about is the alt coin situation. With Binance recently reporting getting hacked, it appears a large amount of withdrawals are putting pressure on many of the alt coins listed on that exchange. The alt space in general has not participated and that is something we interpret as a sign of relative weakness. For that reason, we exited our Litecoin swing trade for a very small loss. For those who don’t know this yet, the smallest loss is the best loss. It can practically be counted as a win.

Relationships in this space change constantly, and when the alts align with Bitcoin again, we will look to participate. Meanwhile. we WAIT for the next long setup in Bitcoin. Can it retrace back to the 5400 area? We do not pretend to know, but IF the market offers such an opportunity, we will be prepared for another swing trade once the appropriate setup appears.

Questions and comments welcome.

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2 Responses
  1. ERSOZ SOZER

    Hi Marc, thank you for the article.
    Just a quick note: Binance actually suspended all the deposit and withdrawals after the hack, only allows trading.

  2. ERSOZ SOZER

    binance: traders see btc is going up and cant put fresh money so they sell their alts to buy btc

    bitfinex: premium for btc and alts are too much, so most trading activity is with btc pairs not usd

    my humble opinion is these two cases put pressure on the alts

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