Bitcoin is sluggish: it goes and then it stops, stimulates a ton of bearish sentiment, lures shorts, then it goes and stops again. So far, the only thing it is not doing is making progress to the short or long side. When you evaluate this lack of progress further, there are some recent technical developments that are in fact bullish. In this article I will provide our recent observations and why Bitcoin is still poised to go higher rather than lower, EVEN in the face of a sell signal.

Not In Play? Better To Stay Away.

Markets go out of play, and Bitcoin is no exception. This is why participating in other markets is so key to success in today’s financial market environment.

These periods of consolidation, and inactivity can go on until a new catalyst comes along to capture the world’s attention. Keep in mind, way back in 2013 after Bitcoin peaked just over 1K, it consolidated for 2 YEARS before the next wave of expansion asserted itself. That’s right, TWO YEARS.

The thing to keep in mind is this: BEFORE 2017, this was a market dominated by retail players (small speculators). Ranges were wide and moves were large (1K to 2K in a day) because of the reactive and emotional nature of such participants.

Since the futures were introduced (and institutions could operate in a way that offered more control and less risk), ranges have contracted. This type of environment is ideal for the institutional or “smart money” participants. Price stability means LESS risk for LARGER positions.

Who will this be LEAST beneficial for? day traders. That is why we continuously encourage the evaluation of large time frames, and avoiding 1 hour charts.

Have you heard our podcast? We explore everything from Bitcoin investing strategies to trade ideas in the equities, options and forex markets. Check out our library HERE.

Bitcoin: Signals Less Reliable Within Consolidation?
Sell signal developing but will it follow through?

Let’s briefly review some technical observations in Bitcoin that keep us in our swing trade long (which triggered 3 weeks ago at 8425).

  1. Bitcoin has established a triple bottom formation around the 7600 minor support area. This becomes the key level that Bitcoin needs to maintain in order for us to have a short term bullish outlook.
  2. Price has established a subtle higher low formation around 7830. Typically higher lows lead to higher highs.
  3. As long as price cannot push new lows (7600), it is more likely to squeeze because of the higher concentration of shorts (signaled by the general bearish sentiment online).
  4. A decisive close above 8500 can carry price into the low 9Ks (very reasonable).
  5. Lack of progress near a low (range low) is a more attractive location for INSTITUTIONAL players. Who do you think is most likely stepping into the market every time there is an attempt to break supports? Chances of a false break out to the short side are still high.
  6. The overall price structure continues to be within a “corrective consolidation” which can still be considered a broad HIGHER LOW. There is NO TREND on the bigger picture. 7600 (recent low) is much higher than 3150 (previous swing low).
Any More Trade Ideas?

We have not had a new trade in Bitcoin in 3 weeks because we are currently long. There is NO reason to increase our risk in this situation. So we WAIT it out.

Many less experienced investors and traders do not want to hear this. They want action. Financial markets are not a place to assert feelings, opinions or personal needs. Bitcoin will go when the herd is surprised by some catalyst that they have not considered.

There have also been a series of buy and sell signals over this 3 week period which have not produced any meaningful results. In other words, price action is highly random at the moment and new signals must be taken with a grain of salt UNTIL Bitcoin makes progress one way or the other. That is why we do NOT react to candle stick formations like the one developing at the moment (a potential sell signal).

The fact that we focus on information that is relevant ONLY to our swing trade strategy is what keeps us PATIENT. It is why we DO NOT REACT to noise, nonsense or any online drama that aims to monetize attention.

WAITING (whether you are in the market or not) is usually the more EFFECTIVE thing to do in the long run. Even if you miss a move as a result, or eventually get stopped out, what you are not doing is eroding your account with numerous trades. This is why day trading is the LEAST effective thing you can be doing in this market.

Preserving your capital during these less active times is what provides REAL opportunity IF Bitcoin offers a more active environment in the future. Meanwhile there are plenty of other markets to consider that are ACTIVE right now.

Have you thought about stocks? Gold? Have you seen the British Pound? Market timing is the same no matter what instrument you choose. You don’t have to be a hedge fund manager to participate, all you need: basic knowledge, a tolerance for risk and the ability to CONTROL your feelings. If you don’t have any of these traits, then you should NOT be risking money in ANYTHING, especially Bitcoin.

Questions and comments welcome.

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