Bitcoin - A Big FAT Nothing Burger!
Another week passes and the crypto space is about as lame an 80's chick flick. There is not much going on which is leading to many simply throwing in the towel out of frustration at this point. It is difficult to post a daily article on Bitcoin' as pretty much the past few weeks nothing has changed. Bitcoin' is attempting to make a soft landing and form the bottom of a range bound market. Since the 11th of January the swing is barely over 10% which is indicative of the market attempting to find a range. At the lower end we have buyers and at the upper end sellers. Now we are still early on here, but the structure is indicative of entering a range bound market.
Trading Corrections and ranges:
If trading corrections is difficult, trading range bound markets is even more difficult. It seems simple at first, buy the low sell the high, but it is never clear if the range is continuing or this is the start of a broader trend. Enter the fake-out which happens often in these type markets. You get a long signal, it triggers, and then gives it back in a single bar. Same with shorting, there is a short signal it triggers, and boom reverses on you knocking you out. Very tough game to play here, but for those more risk adverse it is not impossible. Just ask the countless gurus who are now retired from TV because they are crushing it both ways. Haven't seen their posts recently so I imagine they are on the beach sipping cocktails.
Technical:
The recent retracement has given back about 80% of the bullish swing in December and there is still room to push lower. The 2800 level is within the range of a double bottom variation and is still possible here. However there is some evidence that may show this is unlikely and no it is not a bearish flag, bullish wedge or flying duck, it is simply order flow.
The initial fall from 6k found buyers around the 3660 area. The candle on the 30th took back nearly the entire move from the previous consolidation. Of course momentum was still strong to the sell side and we pushed lower to the 3100 area where we found a softer landing. If you notice the length of the wicks going into the 3660 level they are very long to the up and downside, with nearly a 15% spread in a day. The consolidation around the 3300 area though the wicks are prevalent were not as volatile. However the fake out to the downside preceding this was quickly all taken back by the following bullish swing.
This is evidence of both buyers looking to buy at these levels, and short sellers looking to exit. The current bearish swing on the 10th of January resulted in another short signal which led to a short fake-out. This was the first of many fake-outs both long and short which is indicative of entering a range bound market. In other-words, when price hits a level there are buyers sitting there regardless of the signal, yet the market is on edge so it quickly dried up. Since then we have had a series of fake-outs trapping both longs and shorts. This type of market forms a range bound horizontal or slightly angled channel. Looking at previous support and resistance areas we can get an idea that the range is likely between 3300 and 3660.
Traders:
There are two resistance levels which Bitcoin' needs to push through to gain some momentum. The first is at 3475 and the second 3660. This is the mid and upper range of the support and resistance channel. However until Bitcoin pushes through the 4500 level we consider the market highly risky and trades should be managed accordingly. The challenge with trading the range is you never know when a trend will evolve which is why we would not short this market even if we did. Shorting the upper range could result in getting caught in a bullish breakout and the formation of a bullish trend. That can be painful. It is also subject to fake-outs like the short at 3800 and 3600 that quickly knocked many out of their trades.
This can also happen on the long side, but the main difference here is you can hold a long (not leveraged) position, but can not hold a short one. Slippage is real in low liquidity markets which is what we are in. So as tempting as buying the 3300 level is, you can get caught in a short continuation and feel some pain down into the 2800 area. Sure a stop will help, but often we see stops hit, and a reversal ends up going the direction we thought. Those can lead to being irritated, disgruntled, frustrated and taking on more risk. Do not fall for the trap, it is part of the game and you have to accept this, or trade unicorns on the cupcake express.
Investors:
So here within lies the opportunity for longer term investors and position traders. We are near an 18 month low, or for those that remember the Sept 17 correction where we pulled back from 4800 to 2900 quickly. I am not saying we can't move lower we can, but if you are bullish in the long term 3-5-10 years why would you want higher prices now? You want higher prices when you go to sell not when you are buying.
For those that are not looking to get rich quick, but grow a portfolio over time opportunity is upon us. Sure there are those claiming to be killing it with their claims of 10% a week day trading, however if they were actually doing it, their 10k in Sept 2017 would be worth nearly 1.5 million dollars. Most are still living in mums basement. Trading corrections is difficult and we have mentioned that for over a year. You need to manage risk not gamble on with your sweat equity. Investing $250 in 1992 and adding simply $25 a week in BA would be worth 325k today. I'm sure most of you spend more than that on Starbucks a week. Of course you would have had to ignore the 2001 and 2008 stock market corrections, which had many selling at the wrong time.
In closing:
Do not focus on the interim noise and prices of the market, focus on long term growth. If you are in your 20's your time frame should be 30 years and time is on your side. Get a job and save your money because in the long term it is not how much you make it is how much you save. Most are focused on trying to be a millionaire at 30 and gamble their money away trying to do it. Let me tell you from experience, 50 comes quicker than you think, and at that point time is NOT on your side. Also have some diversity, buy a little stock, buy a little gold' or silver' do not have your eggs all in one basket.
In the long term if you believe in the space, what better time than now to invest? When it rallies to 9k? The problem with trying to time a bottom is nobody knows where the bottom is till long after it happened, however, if your time frame is years or decades out, and your target is 30-40k, does it matter if you buy at 3500 or 2800? Sure it does which is why you must manage your risk, but not adding here at a low if you already have not, may leave you wishing you would have. Even if you add a little, say a couple hundred bucks which is what I do. I leave money on the side just in case we push lower, but I am in no hurry to sell my Bitcoin' and have the patients of a rock!
However though many are pushing a bunch of hoopla daily there is nothing really going on here. The market is simply a Big Fat Nothing Burger for weeks now, and we don't even have a coke to wash it down!
Trading Corrections and ranges:
If trading corrections is difficult, trading range bound markets is even more difficult. It seems simple at first, buy the low sell the high, but it is never clear if the range is continuing or this is the start of a broader trend. Enter the fake-out which happens often in these type markets. You get a long signal, it triggers, and then gives it back in a single bar. Same with shorting, there is a short signal it triggers, and boom reverses on you knocking you out. Very tough game to play here, but for those more risk adverse it is not impossible. Just ask the countless gurus who are now retired from TV because they are crushing it both ways. Haven't seen their posts recently so I imagine they are on the beach sipping cocktails.
Technical:
The recent retracement has given back about 80% of the bullish swing in December and there is still room to push lower. The 2800 level is within the range of a double bottom variation and is still possible here. However there is some evidence that may show this is unlikely and no it is not a bearish flag, bullish wedge or flying duck, it is simply order flow.
The initial fall from 6k found buyers around the 3660 area. The candle on the 30th took back nearly the entire move from the previous consolidation. Of course momentum was still strong to the sell side and we pushed lower to the 3100 area where we found a softer landing. If you notice the length of the wicks going into the 3660 level they are very long to the up and downside, with nearly a 15% spread in a day. The consolidation around the 3300 area though the wicks are prevalent were not as volatile. However the fake out to the downside preceding this was quickly all taken back by the following bullish swing.
This is evidence of both buyers looking to buy at these levels, and short sellers looking to exit. The current bearish swing on the 10th of January resulted in another short signal which led to a short fake-out. This was the first of many fake-outs both long and short which is indicative of entering a range bound market. In other-words, when price hits a level there are buyers sitting there regardless of the signal, yet the market is on edge so it quickly dried up. Since then we have had a series of fake-outs trapping both longs and shorts. This type of market forms a range bound horizontal or slightly angled channel. Looking at previous support and resistance areas we can get an idea that the range is likely between 3300 and 3660.
Traders:
There are two resistance levels which Bitcoin' needs to push through to gain some momentum. The first is at 3475 and the second 3660. This is the mid and upper range of the support and resistance channel. However until Bitcoin pushes through the 4500 level we consider the market highly risky and trades should be managed accordingly. The challenge with trading the range is you never know when a trend will evolve which is why we would not short this market even if we did. Shorting the upper range could result in getting caught in a bullish breakout and the formation of a bullish trend. That can be painful. It is also subject to fake-outs like the short at 3800 and 3600 that quickly knocked many out of their trades.
This can also happen on the long side, but the main difference here is you can hold a long (not leveraged) position, but can not hold a short one. Slippage is real in low liquidity markets which is what we are in. So as tempting as buying the 3300 level is, you can get caught in a short continuation and feel some pain down into the 2800 area. Sure a stop will help, but often we see stops hit, and a reversal ends up going the direction we thought. Those can lead to being irritated, disgruntled, frustrated and taking on more risk. Do not fall for the trap, it is part of the game and you have to accept this, or trade unicorns on the cupcake express.
Investors:
So here within lies the opportunity for longer term investors and position traders. We are near an 18 month low, or for those that remember the Sept 17 correction where we pulled back from 4800 to 2900 quickly. I am not saying we can't move lower we can, but if you are bullish in the long term 3-5-10 years why would you want higher prices now? You want higher prices when you go to sell not when you are buying.
For those that are not looking to get rich quick, but grow a portfolio over time opportunity is upon us. Sure there are those claiming to be killing it with their claims of 10% a week day trading, however if they were actually doing it, their 10k in Sept 2017 would be worth nearly 1.5 million dollars. Most are still living in mums basement. Trading corrections is difficult and we have mentioned that for over a year. You need to manage risk not gamble on with your sweat equity. Investing $250 in 1992 and adding simply $25 a week in BA would be worth 325k today. I'm sure most of you spend more than that on Starbucks a week. Of course you would have had to ignore the 2001 and 2008 stock market corrections, which had many selling at the wrong time.
In closing:
Do not focus on the interim noise and prices of the market, focus on long term growth. If you are in your 20's your time frame should be 30 years and time is on your side. Get a job and save your money because in the long term it is not how much you make it is how much you save. Most are focused on trying to be a millionaire at 30 and gamble their money away trying to do it. Let me tell you from experience, 50 comes quicker than you think, and at that point time is NOT on your side. Also have some diversity, buy a little stock, buy a little gold' or silver' do not have your eggs all in one basket.
In the long term if you believe in the space, what better time than now to invest? When it rallies to 9k? The problem with trying to time a bottom is nobody knows where the bottom is till long after it happened, however, if your time frame is years or decades out, and your target is 30-40k, does it matter if you buy at 3500 or 2800? Sure it does which is why you must manage your risk, but not adding here at a low if you already have not, may leave you wishing you would have. Even if you add a little, say a couple hundred bucks which is what I do. I leave money on the side just in case we push lower, but I am in no hurry to sell my Bitcoin' and have the patients of a rock!
However though many are pushing a bunch of hoopla daily there is nothing really going on here. The market is simply a Big Fat Nothing Burger for weeks now, and we don't even have a coke to wash it down!
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