Bitcoin Buying Into Resistance?

31 Okt 2021

Bitcoin structure continues to point to further strength while at the same time price is stuck in a notable resistance area. This type of conflict can be tough to reason with, but the solution will all depend on how much RISK you are willing to take. In this article I will point out the momentum continuation setup (swing trade) and what can go wrong.

The previous candle has produced a bullish pin bar and inside bar. The momentum continuation idea is simple: if price breaks 63K (just above previous candle high) a new buy signal can be argued. The risk can be defined by the 59K level which means IF price goes there, the trade idea is negated (and should be stopped out).

The overall structure has established a higher low off of the 57K area (one of the supports I wrote about in my previous article). Higher lows often lead to higher highs BUT here is the conflict: The 63 to 65K area (blue box) is a notable resistance, NOT a support. This means that while structure supports a higher high, price is more vulnerable to fake outs, etc.

No matter what your favorite "guru" tells you, there is NO WAY to accurately assess how this will play out. I like to assign probabilities so in a case like this I would guess that there is a 51% chance price follows through since the broader structure is in favor.

YOU have to determine if you are willing to take the RISK. The chance of getting stopped out off of such a level is pretty high while justifying 4K points of risk (price will have to push to 67K at minimum) can be tough to sit through, especially if it continues to play around and produce false signals. What would help this situation immensely is a unexpected bullish catalyst which a chart cannot help you anticipate.

Reasonable profit targets are a function of YOUR RISK. You can project prices off of recent structures for some kind of estimate but either way it is more effective to start taking some money off the table IF price can push beyond 1.5R or 2R. From there you try to let some ride until a new sell signal appears.

Most retail traders (especially with limited experience) are very driven by greed and seem to think that there is a way to sell the TOP of the market. Following this flawed mentality leads to continuously giving profits back that could have been locked in when the herd was willing to buy. You can see this especially with alt coins after a vertical price spike. Top and bottom fishing is the same as outright gambling because these levels often appear randomly.

A more conservative scenario (my preference) is a fake out off the current resistance followed by a double bottom formation off the high 50Ks. A buy signal there would offer a better probability and reward/risk.

If you want more trades, you have to take more risk. If you want higher quality trades that offer better reward/risk, you have to spend more time WAITING. Risk is the only thing we can control in this game.

Thank you for considering my analysis and perspective. I hope you find it to be helpful.