ETHUSD update: After retesting the .618 resistance zone, this market has broken the 450 support area and is now sitting within a support zone. The big question is: Is this a good time to buy?
My first impression of this price action is investors are selling their ETH to buy more BTC because of it's relentless new highs in anticipation of the futures contract starting on Sunday. Markets like BTC are extremely rare, and are great if you are in, but the futures are going to bring it back to reality. I believe the futures are going to attract a lot of volume away from the current exchanges because of their security, flexibility and credibility (something current exchanges are missing).
This market is behaving more in line with reality. In reality, prices correct to some degree. And at the moment, this price is sitting within the .618 support zone of the recent bullish swing that failed to make a new high. Aren't support zones a place to buy? They are, except when momentum is bearish which is the case here.
In support zones like this, I prefer to see a chart pattern reversal before getting long. On the current time frame or even smaller. Or I would like to see a candle stick reversal off of a retested level like a double bottom.It is not happening here. Just like there are no confirmation for shorts in BTC, there are no confirmations to go long in ETH for a swing trade at the moment.
Since the momentum is still bearish, I am expecting price to retest the 385 low, and possibly the bullish reversal zone somewhere above 361. These are the levels where I will be watching for reversal formations to go long for swing trade in anticipation of a retest of the 470 to 488 resistance zone (.618 of previous bearish swing).
IF price decides to reverse sooner without a formation then a bullish break of the 435 resistance (.382 of recent bearish swing) is the signal I will need to see. At that point I can look for a shallow retrace, or some other signal to start buying. Confirmation is key, because what happened at 455 can happen again. This is what I am expecting BTC to behave more like once balance returns (and the majority of U.S. investors and traders will be able to short).
In summary, buying a pull back in a broader bullish trend is in line with my trading plan, BUT some form of confirmation is required. This process helps to filter out many false starts or buying too early. It is no different from shorting BTC right now which I have been warning against because there are no signs at all. Do you want to see what a market that is setting up for a sell off looks like? The two week double top formation in this market is a prime example. Relative to the current formation, any price action below 385 will be extreme and offer the best reward/risk, just wait for a reversal formation. Usually before the market starts working its way back up, it will show a pattern on a smaller time frame (look at the long tails at the 400 and 385 low that were tested a week ago). When it comes to TA and these markets, there is a huge amount of ignorance which will serve as an advantage as these markets return to reality. Remember TA is most effective for evaluating momentum and reward/risk on smaller time horizons. People who can put this into perspective and recognize its limitations are the ones who have a better chance at achieving consistency. Normalcy does not imply a bear market, just one that does not go up in a straight line. The BTC situation is breeding unrealistic expectations and reinforcing bad habits which will be the mechanisms that offer the more experienced traders opportunities when these markets regain some normalcy.
Comments and questions welcome.
Komen
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Update: I am LONG 420.27 STOP 396.45 TARGET 453 R/R: 1.4/1
Based on 4 hour chart formation. Report to follow.
Of all the things posted by anyone lately, your post rings home for me the most Marc. I appreciate hearing those words. I have lost much potential profit by not buying into BTC trades, however I feel like there is never a logical setup, the market is doing completely out of character movements, that leave me feeling like it can be nothing else but heavily manipulated. How and by who? I don't know. Big money coming in and driving it sky high before they short it monday with the futures? No one can say. However I feel I have been learning my TA and becoming an effective trader for a NORMAL market, which BTC currently is not. I'm looking forward to a long overdue correction, and while others are screaming in the street in confusion, good traders will be taking advantage of it. Thank you for your time, always, and good luck trading.
elblinko
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@Sixboost, look into tether and Bitfinex and you might see how BTC is being manipulated
Sixboost
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@elblinko, honestly I think all the fud with tether is bullshit, did you see Bitfinex has enlisted a solicitor to go after the guy who calls himself "Bitfinexed" thats spreading all this fud? I see all these fanciful correlations but not one shred of proof that anything is being done wrong. Lets state the obvious, billions a week is coming into crypto. John Bloggs buys $20000 worth of BTC at ABC exchange. He sends that to Bitfinex/Bittrex/whoever that has USDT trading pairs. He trades his btc in and out of usdt on corrections to gain more BTC. His USDT was paid for with legitimate bitcoin. The exchange now owns that bitcoin, or any other USDT pairing you sold to them.
Have you sat down and worked out how much money the exchanges make from the tether pairings? For Bittrex alone, which does way less volume than Bitfinex, its $750000 usd PER DAY, thats $5 Million PER WEEK. In fees alone. Tell me why they wouldn't pay legitimate money to tether for that opportunity and return on investment? My last question is this... Exchanges are price levelled by bots... You really think other exchanges would sit idly by knowing Bitfinex was using free printed money to push up the price while their bot had to buy the btc on their own exchange constantly to keep up? No, I wouldn't think so. Frankly I think its all fud and there is nothing illegitimate about USDT, if it fails it will probably be because people get scared away from it BECAUSE of the fud. To each his own, I'm happy to be proven wrong.
Regera
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@Sixboost, USDT is supposed to have an equal amount of fiat in reserve for every Tether they issue. They claim to be transparent but instead of showing the properly funded reserve they hire a law firm to sue for defamation... so that kicks the can down the street for a while until they can find a way equalize the reserve or be exposed. I say If they had it, they would have no problem showing it and right now they can't without being exposed. Why is this important? It's easy to artificially inflate the price of Bitcoin by issuing counterfeit fiat. Most people don't want to care and will gladly overlook it because they like this bull run. However, institutions and futures will care and it's going to be interesting how they view this issue.
Sixboost
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@Regera, See my reply to elblinko below. There is one fundamental flaw to all your thinking. The market cap for Tether has increased half a billion dollars since the 31st of august. The market cap of bitcoin has increased 190 billion. Um..... Yeah. And that half a billion tether is over all exchanges and against every alt pairing.... Yep, clearly thats the reason lol.
Regera
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@Sixboost, the link you provided doesn't prove anything one way or another. The Tether issue is simple: If there's X amount of Tether, there should be X equivalent in fiat. That's their promise yet when asked to produce evidence that they have it, they refuse. Why would a "transparent" company refuse to show something that they're supposed to have? Tether charges 0.1% to change fiat in to tether and vice versa. How can they afford to do that with business costs like compliance fees, transfer fees, salaries, overhead, insurance (doubtful they have it), etc. Their FAQ says they back everything 100% yet if you look at their "balance sheet" it's as informative as this: USDT in circulation - 845mil. Quarantined amount - $30,950,010. Total amount of fiat assets - Subtract first number from second number and we promise we have it somewhere and that it's audited regularly. Have you seen their "audits?" It probably took 20 minutes longer to generate than the balance sheet on the website. There's no reconciliation or anything that resembles an audit... after all it's a one page letter written by a guy whose name and phone number doesn't exist on Google despite being the one who "audited" an asset supposedly worth almost 1bil. No one knows for sure what the truth is because we simply don't have access to it. However future companies like CME are aware of this and they're going to price their futures based upon more factors than any of us would and that will be very telling about what they believe the true price of Bitcoin is.
Sixboost
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@Regera, Just like the crap you speak doesn't prove a thing. Your whole story hinges off them refusing to be audited and pessimism. Nothing else. Not single shred of financial or actual evidence. I've pointed out to you that there is a few hundred billion difference between the total amount of tether, and the increase in BTC's market cap, Bitfinix do 40% of the world volume or so trade wise, and take .025% off transactions in fees, and you think they can't afford to buy the tether? Hell Bittrex did $750000 in fees just yesterday alone, on the BTC PAIRING alone in FEES. Yet you still think these guys can't pay them with legtimate money? Come on man put the crack pipe down.
Last point to make. Check the volume of where the money is coming for this last push in price.... I'll give you a hint. Its america. The same guys who are about to release the futures contracts are buying the asset they are providing the futures for.... Institutional money. Buying, with actual cash, the product you claim is pumped up with tether. Lol. Good luck on your witch hunt.
Regera
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@Sixboost, You think that it's ok for them to refuse an audit? That explains why you don't get it. You might want to get educated on how the futures contracts work because the only two names that matter this month for futures trading are settling everything in cash and will not take possession of any Bitcoin. It's better to be silent and thought to be a fool than to open your mouth and remove all doubt.
Sixboost
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@Regera, How would you know why they refused an audit? Seemingly you don't know a fucking thing except what you read from one guy on twitter. You haven't provided a single logical fact except for now resorting to your final and only argument being the refused an audit, they must be dodgey. Your last line is hilarious, and suits perfectly champ. Good luck with your witch hunt. I'll check back when nothing bad happens to remind you of your closing statement.
Regera
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@Sixboost, I don't care why they refused it. The fact that they are avoiding it damages their credibility and raises suspicion about what other things they may be concealing. In addition, their prior "audits" have less detail than what is required for a standard verification of deposit. As for the person who signed off on the audit, his name, phone number and firm doesn't check out. Lastly, Tether's entity structure, domicile and terms of use make it difficult if not impossible for US citizens to have any legal recourse. I don't use Twitter but I have spent my entire career in financial services so I know a thing or two about due diligence, fraud and the impact of Tether's unwillingness to be as "transparent" as they claim. You may think I know nothing but lots of people with ego issues feel that way about anyone who challenges their way of thinking. After all, you were the one who actually believed America was behind the latest surge because they're buying large quantities of Bitcoin for futures trading. You've been exposed and your reaction is to accuse me of not knowing what I'm talking about and assuming I get my thoughts from a Twitter post. Psychological project much? Between your ego, inability to control emotions and lack of objectivity it'd probably be best if you left trading to the professionals.