When Bitcoin retraces to support levels, professionals look to buy and if you sell, guess who you are selling to? For weeks we have been writing that the current structure is a corrective sequence. That means fake outs, and what you are seeing now, testing lower regions of the range. The biggest mistake you can do in this environment is listen to others who obsess over smaller time frames, like 2 hour charts. The reason? They will have you believe Bitcoin is going to zero. They are blind to the broader supports that carry more weight in this market. Support levels in bull markets are locations to anticipate buying, not more selling. So which levels are the most relevant now?

Since the recent swing high of 13,868 which was established a couple of weeks ago, we have been anticipating the kind of price action that is in the process of unfolding now. The corrective consolidation is just another way of describing a broader Wave 2 corrective structure.

The key to understanding this type of corrective environment is knowing what is within reason. Considering the magnitude of the previous bullish structure helps to form expectations that are IN LINE with the market, NOT with what your favorite news outlet says.

As ugly as this price action may look to you and your favorite 2 hour chart gurus, all price is really doing is testing the lower regions of the broader consolidation.

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Savings Are Where Returns Come From?

In this Bitcoin chart, the large dashed lines represent a swing trade idea sent out recently to our members. Notice the large blue dashed line was never compromised. That was our buy trigger. It NEVER filled, which means we were able to avoid a loss of over 1000 points.

This is why we always remind our members to WAIT for the trigger and NOT to buy into something because it “looks” or “feels” right. This serves as a perfect example of the defensive mindset that we vigorously adhere to, no matter how “great” the market looks, or how aggressively we are criticized.

People are quick to complain about a missed trade that worked out, but never seem to notice the missed loss. These hidden wins are what make it possible to generate a positive return over the long run. Have you evaluated our track record for swing trades? By the way, a missed trade that was favorable does NOT erode any capital.

Bitcoin: NOW Is Time To Watch For Buy Signals.
Now at attractive location to buy BUT no signal. YET.

So what now? Everyone is calling for shorts and we are waiting for a reversal to go long. We don’t react, we evaluate our levels and simply WAIT for the market to come to us. All it requires is patience and a flexible mindset.

Why won’t we consider a short in this situation? Shorting is NOT within the scope of our strategy for this market. If we were open to shorting, it would NOT be at current prices. The reward/risk makes absolutely no sense.

Currently, price is fluctuating around the 9500 area. This is not much lower than the 9750 support level (.382 of entire bullish impulse wave from December low to recent swing high). This level represents an area, or region, NOT a precise price point.

This means that price can fluctuate above and below the level within some degree of error. This is what your 2 hour chart gurus do not realize because they are missing the probabilities of the bigger picture.

Reaching a support region such as the 9750 area is just the first step. If price action is going to hold and reverse, it will have to provide evidence of that. This evidence can express itself in a variety of patterns.

A double bottom that develops over the next few days would be one example of evidence. A simpler example would be the appearance of a pin bar.

Unlike many other “experts”, we let the market TELL US when the order flow is in favor of our trade premise. We do NOT predict or pretend to know exactly how any market will play out because NO ONE can possibly know. There are infinite possibilities and the best we can do is weigh probabilities and risk. The rest is up to the market.

What if price decisively clears the 9750 area? The next proportional support where we anticipate buyers is the 8500 area. Any test of that area would be extreme. This happens to be the 50% retrace of the entire bullish impulse that goes back to December.

Often these are the locations that offer very attractive reward/risk for position trades and swing trades alike. Again, we let the market tell us, not the news, not how we feel, and certainly not all the chart porn polluting the internet.

Are You In The Vague Zone?

Did you know that a swing trade is a trade idea that is based on a very specific premise and contains very specific entry, stop and target orders? That is our definition anyway.

Many signal providers offer buy and sell “zones”. Interestingly enough, these “zones” are often vague and make it very easy for the provider to justify favorable entries/exits AFTER the fact. And you thought the “friend zone” was painful.

Usually if the trade works out, they will say they were in it, but if the outcome was negative, somehow they managed to avoid it AFTER the fact.

This is why we make every effort to be PAINFULLY clear about our trade orders, reasoning and risk adjustments. Particularly for our swing trades which require more specifics than a position trade or investment.

Most new to investing in Bitcoin do not realize that it is no different than any other financial market. Especially for the short term strategies, order flow is driven by nothing other than the irrational forces of greed and fear. Human psychology. That’s it.

If you want to capitalize on it, the first thing you must do is separate yourself from it. How? Stop consuming the same information that everyone else consumes. Here’s a hint: if everyone has the same idea, then chances are the opposite is true. If everyone is calling for Bitcoin short, it is probably a long. Especially when it is testing a major support level within the context of a broader bull market.

Questions and comments welcome.

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5 Responses
    1. Marc Principato

      Often “facts and math” people will refer to price distortions or inefficiencies that allow for unusual and unique opportunities. What do you think is driving those price distortions? Math? Hehe.

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