Risks and considerations for BTC bears.

업데이트됨

I shorted crypto into the rally big rally and while I was quite a bit early on it I managed to stop out before the main sections of the rally and short higher.

I've currently been short for several weeks with it being quite painless. All weekly bear closes. We're now threating some bigger bear breaks which would open the door to 50K and 40K, but I do also think now is a good time for bears to be very mindful of different types of bull risk.

Bear Break Setup is Simple Enough.

Firstly to give the more obvious looking basic bear break setup due attention. If the market breaks, it should be simple enough to follow. A bear break setting up should be able to maintain lower lows and lower highs so anyone running bear trades from higher can just trail stops and see if the market wants to pay them out.

We now have a large double top like formation which means if we make a bear break we'll have a pending harmonic. This would give a bull case of a sharp drop to the 50K area and then a reversal to new highs. Alternatively, the bear case would look for a dead cat in the butterfly area and then a stronger break.

I'd expect this to usually be a pretty simple move and easy to follow if and when a break is made. I know how to deal with those kind of breaks. It's more important to consider the blow off risks.

The Bearish Butterfly

The main risk for bears right now is we might be making a double bottom.

I don't find it's worth betting on double bottoms and double tops. It's a bit of a sucker bet from my point of view. Sure, you'll win trades. You'll remember those ones. But will you win enough at high enough RR to offset the cost of betting on them all the time? Not without a good filter. Since 100% of bear breaks once look like double bottoms and bull breaks like double tops.

Too many false signals for me to trade off it - but when you're betting on a reversing bull market and there's the potential for a W spike out, you should be alert to the risk of that near the double bottom. This will allow you to take protective action early (You'll usually find price moves too fast to make it easy to adjust later if it comes).

The reason you have to worry so much about this is there are a couple things that are common in reversals;

1 - Reversals often form with harmonics. We can see W shapes at tops and M shapes at bottoms
2 - In a harmonic the last leg (D) is always the strongest.

Ergo, we can safely say if there is to be a butterfly spike out - it's going to be a horrific affair for bears and it's going to be in a style that induces bull mania.

As a bear, this is a huge opportunity to plan a short at better levels and with various conditions to filter an entry - you just have to avoid shorting the low. Which can be pesky.

Can We Go Long for the D Leg?

As an overall rule, betting on D legs forming is a losing bet. A sucker bet. Like the double bottoms/tops thing. You do win them but a lot of failed signals. D legs are actually hyper high pay off so they're not so much of a losing edge - but as someone who's traded harmonics for a decade I can tell you if you always assume a D leg you'll be wrong a lot.

I can also tell you as someone who's set literally 1,000s of limit orders for harmonics that when they miss (The D leg does not form) there's often a strong counter move.

It's viable to map out an approx bullish roadmap with the harmonic and then use other things to confirm entries and pick stops - but if the double bottom fails that's a hard stop loss.

Buying into lower highs on small charts if they start to form to follow momentum can work better. The key trait of a D leg is its strong momentum that picks up as it continues.

Wave 5 Blow Off

Another risk for bears is we're in a wave 5. Setting up a bigger short, after a spike.

Wave 5 is preceded by wave 4 and wave 4 is notoriously choppy and tricky.

- "Are price moves messy and confusing?"
- "Are there are lot of whipsaws?"
-"Are all the breakout traders grumpy?"

If the answer to all of those is "Yes" then it's always worth keeping the risk of wave 4 in mind.

Being near the end of wave 4 would forecast a really strong move coming soon (Could be some sort of false breakout first. Wave 4s are really ugly action).

Bullish Breakout.

BTC would very heavily deter me from attempting big bear trades on it if it broke the 1,61 and 2.20 fibs here.

That would break all of the norms I look for in a topping move and be far more indicative of continuation.

Preferences and Biases

I'm very well positioned for a bear break if it comes. It's the way I'd make money without having to really do anything. With that said, I'd see the spike high and reversal moves as chances to make much more money overall. These would be my preference and I currently have a slight bias towards the harmonic spike.

I do not have any long positions at the moment. I've taken steps to lock in in profits and make sure I bank a net win on my attempts to short BTC in this zone. I plan to use small chart bull setups / momentum / breakouts to accumulate a long position IF we have up trending action on small charts.

I prefer to short into rallies than breaks, but if the bear break comes here I think it'll be fair simple and we'll revert to standard bear market strats.

We're in a good spot to be agnostic and plan for multiple outcomes. It's highly likely there's money to made in the next two or three big swings and all it will require is not over committing to any one idea so as to be able to take advantage of other things if they happen.

Bear break setup looks good. It all seems like an obvious break coming. But as someone who bets on highs and lows a lot, I become quite paranoid when it looks obvious.

It's rarely obvious when it really happens. It's often obvious right before it runs your stops.

노트

If this 61 fib holds as a support level then there's really not much of a bear case. A 76 low and 61 retest are two things we see before the start of a new move in line with the trend.

The 61 retest here is a good buy level with stops under the 86 (At widest) and they can go under the 76 (Usually if that hits the 86 ones will also anyway).

액티브 트레이드

We can both further support a long here and further improve the stop loss zone by zooming into more recent action.

The recent drop has failed to make a new low and has stopped on the 76% retracement level.

Which is something we can see at the start of an up move.

It looks likely this will go at least a little higher. Even if we're looking for strong bearish continuation here we'd be likely to see a stop hunt to the 76% fib (Shown in red) and if this area breaks, then that's probably failure of the downtrend (Shown in blue).

So the case here for a long is decent. Small risk can be taken with stops under the recent low. Even in the instance where a new low will be made later we'll often see a bit of a spike first. If the 76 zone hits we can move long stops to even and freeroll for a possible break.

노트

If the next resistance level is broken then we'll fill a big pending bearish harmonic. This is another spot where we might reverse and make lower lows but if the harmonic fails then there's an extremely likely chance the downtrend is failing and a new high will be made.

The sequence of events here that would tell us a low is made are as follows;

A big 76 holds (Done).
In following retracements the big 61 holds (Pending).
The failure of local bearish 76 retracement to make new lows (Pending)
Failure of the butterfly (Pending).

At this point we are at the decision level for the 61, very close to the decision level for the bearish 76 and if that bearish 76 breaks it's very likely the next thing we'll see is the harmonic testing.

So ... we may well be early in the sequence of events that becomes a downtrend failure.

The lower lows and lower highs have not yet failed. The downtrend is technically still healthy - but we may be heading into a sequence of events in which the low is now made.

노트

Low hanging fruit move hit. BTC makes a big strong jump into the 76 fib.

The requirement for an ideal bear trend here is a top around this 76 (Maybe already in but BTC is a prolific spiker) and a new low.

Basic trend rules. I'm using 76 retracements but these are just representing the same rule as "Lower highs" in basic trend theory (I'm just looking for shorts mainly when we're close to that lower high).

As I've said above, there's usually a bit of a sequence of events that lead to a big reversal. Each not seeming all that important in and of itself but all running into each other setting up progressively bigger trend failures.

Our first major sign the BTC bear is no longer healthy and strong would be a failed 76> Low move here.

노트

Various types of retracements may be made from the 76 or 86 area. Oftentimes these fit into neat fib rules (Like 86 retests 76) but the main requirement is whatever type of pullbacks there are from this area they do not make a new low and later break the 86%.

A break over the green arrow after a failure to make a new low would be first red flag for bears.

Once a 76 breaks we're going to usually see at least the next 76 hit and if/when this happens we can apply the same sequence of rules.

76> Low = Things we see in a bear trend.

76 - 86 reaction and failed low = Things we see before a move to at least the next big resis.

This is a scalable principle. It can be done on increasingly bigger swings until it's the full swing.

This offers a way to keep alert of the possible resistance levels if you're a bull and helps you to get out of trades quickly and plan better levels later if you're a bear.

노트

If price rockets up (Repeating action like very recent up move) then it becomes all about the pending harmonic.

A strong and persistent rally would be entirely inline with a bearish harmonic signalling a continuation trade at 1.61.

It's easy to fit a strong move of $3,000 inside the context of "Just an aggressive correction". But if and when that fails, then I think that sets off the line of dominos that leads to a new high (Or at the very least a 76% retracement from ATH).

At this point I really have no speculations on what happens if there's a new a high. It's easy enough to plan levels. We'll see what happens and think more about details as it becomes appropriate. I do think a failure of 6,400 would mean a new high, though.

And a new high in the fairy near future. Not a case of "It will recover sometime" - it being a case of "That's that drop done".

Or we might make a new low and I'll feel pretty damn bearish. Who knows. Trading's fun.

Bull case looks good but still has to prove itself level by level until it meets the big test at 64,000.

노트

Above the 64,000 break out level there are ways to generate possible bearish 76s. Can generate a few of them using different swings.

I do think this is really useful for being aware of risk levels as a bull. I usually draw these fibs and trail my stops as we get close to them. Thinking either they break and hold retests or it might reverse.

Using the 76 rules as a bearish strategy would flag up various short ops on the way up. Sometimes they work - but it is highly likely these are going to be ran.

If the harmonic fails my plan is still to track all the possible bear signal areas but avoid bear trades while momentum persists.

노트

Okay first big area of resistance filled now. Stop to even, as per plan outlaid above.

노트

Above there are various examples of patterns I expect to see when a possible reversal level tags but no new low is made. I've done them on small local charts but it's worth noting this may be a major version of one.

If you're a follower of my work, you know I already don't love the 86 hitting as a bear. However, 86 hitting and a failure of a new low really flags up the exit risk for me.

노트

Next big risk area for bears now. I fancy it as a long here tbh.

This may be the tricky false breakout I spoke of the OP.

Updates on the thread below: