Bitcoin: Watch Retrace 55K Area.

14 ביולי

Bitcoin has retraced back to the 60K resistance (as anticipated by previous scenario). As a previous major support level it is likely to act as a new resistance within this broader range bound structure. While there is no confirmation or reason to sell at this time, the 60K to 62K area still serves as a potential bearish reversal point at least for the shorter time horizon (coming week). Such a location can offer aggressive short opportunities for traders who employ lower time frame strategies. The key in these situations is CONFIRMATION along with LOW expectations.

As important reminder, markets are MOSTLY RANDOM. Price adjusts as new information is processed by the MARKET, NOT what you "think" is going to unfold. My goal is to isolate a small range of scenarios that are more likely to unfold over the next week or two. These scenarios are based upon the broader trend and historical inflection points. These data points CANNOT forecast the future with any accuracy but they can help to assign probabilities. When you are dealing with probabilities, that means there is a chance you can be WRONG. Since the chance of being wrong is about 50%, RISK must be carefully assessed in order to determine if a trade is worth taking. The professional looks to minimize and control risk while the novice focuses only on potential profit (and dreaming about Ferraris).

In the case of Bitcoin in the 60K area, based on previous activity, there is a greater chance of a minor retrace. This situation is attractive for smaller time frame shorts which require specific confirmation (Trade Scanner Pro). It is important NOT to get carried away with where such a short can go in the future. If you notice, it is always after an extreme move, (like the test of 53K) all of the "experts" start calling for 45K, and not a reversal to 60K resistance. My Trade Scanner Pro signaled a long on the hourly off the 53K support that was worth 3K points for 1.6K point risk.

It is also important to note that the general area between 52.5 and 56.5 is a proportional reversal zone (compared to the previous 56K low). This is not something I can explain here in detail but the key take away is: this area should be considered a high probability zone for BULLISH reversals. Which brings me to this point: Any retest of this area followed by a bullish confirmation not only offers a high probability swing trade long, but one with great potential. What makes this most attractive is the relatively low amount risk associated with this scenario (see arrow). Think about it: which location carries greater risk to longs, 70K (near range high) or 53K (near range low within broader bullish structure)?

The most common novice mistake I see is "reacting" to what you see. This is a game where the reality of what is actually moving price is hidden from us. Reacting means you are rooting decisions and taking risk on information that is typically irrelevant to the real catalyst. We are often fooled into believing the "real" catalyst is the news at hand, etc. Which is usually only part of a much more complex puzzle. Instead of trying to solve the puzzle, I look for the least amount but more effective information points to assess probabilities and risk, without paying ANY attention to outside factors such as news, expert opinions, complex charts, etc. Less is more in a game where 99% of the info you consume is not relevant.

So for the coming week, I anticipate a minor retrace, possible double bottom (see illustration). Good for aggressive shorts for traders on small time frames. At the same time, I do respect the possibility that price may continue through 60K and potentially reach the 62K to 63K area which can be good for momentum continuation patterns. Which scenario you choose and what expectations to associate will all depend on your style, personal risk parameters and time frame.

Like I demonstrated in a recent meeting, first you choose the type of trade you are looking for, day trade or swing trade. That decision BEFORE even looking at a chart will shape how you assess risk, potential and context for the entirety of your personal decision making process. This is NOT about forecasting the future, its about assigning probabilities and then LETTING THE MARKET confirm or NOT. If you "think" you lose because the market is ALWAYS right.

Thank you for considering my analysis and perspective.