Bitcoin – Trying to Retain Bullish Momentum

Overview:

Bitcoin is attempting to make another leg higher but there are numerous signs that the rally may be stalling.  This is where we just step back and let the market reveal its hand and not attempt to force trades.

Sentiment:

Analyst after analyst whom were just calling for $4000 and lower weeks ago, flip to 10k and higher.  This provides some insight into the overly bullish sentiment surrounding Bitcoin and another signal for us to just step aside.

Though there is still some room to run higher, we would rather leave some profits on the table, than give up gains from previous positions added at lower prices.

BTCUSD

Bitcoin

Each buy the dip has been met with selling pressure, which creates a pattern like the Ascending Wedge.  Again it is not the pattern that is important; what is important, is order flow observed through price action including the current position Bitcoin is in.  

The outside candle on the daily, that started as a breakout, resulted in a fake-out, is a red flag providing evidence of selling pressure around the 9k level.  A break and close below 8400 would further add weight to the market has temporarily topped, and we can look for a broader correction.  This is not going to happen overnight, and may take days to a few weeks to play out.

On the positive side, price is lingering, not falling apart, and normally price is rejected quickly at these levels.  Any dip has been bought up quickly; However, we have yet to see follow through.  The more times momentum fails on a breakout due to selling pressure around the 9k area, the more susceptible the market is to a final selloff.

Long Signal:

There was a long signal that triggered a few days ago that is still in play.  Though this is a valid continuation pattern, the position and prevailing price action makes taking this trade risky.  No different than playing 78 suited after a raise and you are out of position.

The conservative stance here is to just step back and let the market play out.  Like poker, trying to play every hand will often catch you in what you feel is a winner, only to realize it was second best.

Playing Strong Hands:

We like to play strong hands, and these appear less often but have a higher probability of being a winner.  Though there is the potential of a rally to 9700, we are not playing with a strong hand here.  Since this does not meet our criteria for a trade we simply pass.  It is better to throw away a winning hand, then play a loser.

Often the best trade is no trade, and this is our current position.  If price does pullback into the low 7k’s it would be an opportunity to add for the broader term or look for a swing trade off a bullish reversal.  However we want to see some signs of support through structure and  price action.

Levels of Interest:

Though there is the potential to push into the mid to low 5k’s, we consider this scenario unlikely this early into a bullish cycle.  Anything under 7k is a buying opportunity in our opinion, and this is what we will patiently wait for.  Knowing where it will settle and reverse is simply a guess, all we can do is look for evidence of a reversal once a pullback happens.

The levels shown are just preliminary levels to give us an idea of where to expect a reversal and are not finite.

Summary:

Gains made during favorable trading environments, are often given back trading risky markets.  This is one of those times, especially when the alt-coins are also showing signs of a top.

Even though we were aggressive at 5100 we are in an entirely new position and one where a correction is very probable.  The market has rallied nearly 300% off its low and even strong markets need a breather.  Can we go higher, absolutely, but the odds are in favor of a pullback, and those with patience are often rewarded with better prices.

This is our position at this time.

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2 Responses
  1. Rammasterflash

    Thanks! For those of us that dollar cost averaged in at the 3-5k range, it’s very tempting to take profits. I’ve locked in 16% profit at 8k, and feel tempted to do so again here and also do so with eth.

    What’ are your thoughts on profit taking at these levels?

    1. Andrew Gonci

      My theory on this if you have 15-30% of cash in this phase of the market I am good, especially if I added in the 3-5k range. Also take a look at capital gains you would pay, subtract this from the price and this is the level it has to go below for it to be worth doing.

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