BTCUSD: Consolidation Is Broad Higher Low. Sign Of Strength.

2018년 1월 12일

BTCUSD update: Price action fluctuating within 12879 to 13786 support zone while presenting another double bottom reversal formation. Even though the momentum is still bearish. this area and the range lows (11600) offer a more attractive buying opportunity for longer time horizon strategies.

The first observation to consider is that this market is in a broad triangle. If you look back at the reports I was writing during the broad sell off, I explained that is type of price action was reasonable to expect on the bigger picture. Consolidations or triangles are nothing more than trend continuation patterns and the bigger picture trend is still clearly bullish.

I keep getting questions about the "head and shoulders" patterns and why I am still bullish. If you notice, they keep forming, but the market is not falling apart like many keep saying. What people do not realize is that the context of the environment carries more weight than the chart patterns. The broad consolidation that is forming above the 10700 low is a HIGHER LOW within an environment that is generally bullish. These markets continue to grow, fundamentals are generally strong. These factors reduce the chances that a head and shoulders will take this market below 9K in my opinion. Especially since they keep developing within a broader triangle which is only setting up to eventually retest the higher part of the range.

As far as levels go, the 13786 to 12879 is the .618 support zone of the recent bullish swing. It is an area where risk/reward for swing trade and position trade longs becomes more attractive, especially since price is showing evidence of some buying activity in the form of a double bottom formation off of the 12879 boundary. Keep in mind price can break lower into the 11600 or 10700 areas which are the range lows and I will still be looking to buy.

As far as trades go, I am looking at this market from the position trading perspective. My plan is to still accumulate more as the weak hands exit their positions and attempt to lock in profits IF price retests the upper resistance zone (16350 to 17876 area). The current area also offers a swing trade opportunity long since risk can be clearly defined by the 12639 low. I do not short these markets because I do not use margin, and the spread on the futures is still much too wide to make day trading practical for my strategy at the moment. This is why I would rather build a position trade, which requires less precision while risk is controlled through sizing. Since I have been long from 13150 (I wrote about this trade weeks ago) I will not add unless price tests the 11700 or lower areas of the range.

In summary, I am writing about my perspective, strategy and how I am participating in this market. You do not have to follow it or agree. It all depends on your perspective, your plan and your risk tolerance. Some people are screaming its a short, and I will enthusiastically buy from them because I see the technical structure on the bigger picture and this market is in a position to generally go higher. When you find yourself unsure, always zoom out because getting too focused on smaller time frame moves will cause you to react more rather than anticipate and blind you to the broader opportunities. Triangles are trend continuation patterns, and the broad trend is still bullish. What is the best practice in strong markets? Buy supports because they will have a greater tendency to hold. You just have to be able to identify supports that are relevant to the magnitude of the time horizon you are willing to participate in. Supports on a 5 minute chart do not carry the same weight as supports on a 6 hour chart.

Comments and questions welcome.