Bitcoin: Bear Break In Favor.

16 Okt 2022

After a week of potential catalysts, Bitcoin is STILL gyrating around the same prices. The bullish pin bar that appeared on Thursday (result of CPI report) has been followed by a bearish pin bar which cancels out the momentum. Meanwhile NOTHING has changed in terms of the broader price structure OR economic environment. While Bitcoin appears to be out of play, probability STILL favors a break of support. Sorry no magical rallies on the horizon (in case a fake guru gave you false hope, again.).

How are the bears still in control? It is painfully clear on the chart, resistance levels continue to be respected. The 22 to 25K area has yet to be compromised, and the same for the 20,500 area. These are LOWER HIGHS. Yes price is stuck in a range, but the range will eventually break, and since lower highs often lead to lower lows, the 18K level support is more likely to be compromised. Keep in mind just because a support holds for some time, does NOT mean it will continue to, especially if more and more longs are being lured into the market. CONTEXT is key in these situations and context goes beyond what you take for granted on a price chart.

What to look for this week: It is just a matter of catalyst, IF the S&P breaks, Bitcoin is likely to break lower. This can take price into the 17K support. This is what price structure favors, but it does NOT mean it WILL HAPPEN. Preparing for this potential move is going to depend on your particular style and time horizon. From the swing trade perspective, the more conservative thing to do (and much less popular) is to let the market make the initial move (break support) and then look for momentum continuation on a smaller time frame. The aggressive trade is to sell into the support break, but this presents very high squeeze risk (you can imagine all those impatient shorts who overreacted at the 18K lows after CPI came out).

Is there a long side to consider? Only on the smaller time frames. IF 18K is tested and holds, an aggressive swing trade long or day trades can be justified but profit expectations NEED to be LOW. Same goes for any bullish break out attempt at 20,500. The chances of fake out are very high and the probability of any sustainable rally is LOW. You MUST be objective in this game, and not get into positions because of emotional needs or lack of self control.

When a market is out of play (stuck in a tightening range), it is usually more effective to LET the market make the FIRST MOVE. Don’t try to out “think” the market. It is highly random and it adjusts as new information comes to be known. Unless you have this information before the market knows about it, you have NO advantage. By asserting your opinions, or “thinking” you know where the market will go next, implies you know more than the market. Let the market show its hand, evaluate the risk along with the probabilities and then determine if the risk is worth taking. WAITING provides more value than taking action in this game.

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