And must be maintained in order for our longer term outlook to remain bullish. IF price takes out this level, it will be signaling that Bitcoin is more likely in a broader range rather than a bullish trend.
Keep in mind, it is possible that price can establish a reversal formation before reaching the 9140 area. In which case we would be open to a new swing trade long as well. It all depends on the price formation and setup.
LINK, LTC, XTZ
Another important consideration is that many alt coins like LINK, LTC, XTZ, etc., are showing a similar pattern to Bitcoin which emphasizes that Bitcoin is still the sector leader. IF Bitcoin does not go higher, the entire space is likely to suffer as well. Point being that whether you are in ETH, LTC, or any other coin, essentially, it is all the same trade. This is especially important to understand when it comes to managing risk responsibly.
11,600 to 12,300 continues to hold Bitcoin back, BUT at the same time, price has YET to take out any significant support levels. The 11K area continues to hold, and IF compromised, we are then looking at the 10,500 area for the next buying opportunity. It is important to not lose sight of the broader structure which is CLEARLY bullish. In situations like this, smaller magnitude reversal patterns such as the head and shoulder formation carry much less weight.
Also when there is significant selling off of a resistance level, often there is follow through. Meaning. after the initial bearish candle, the following candle often takes out the low and keeps going. At the moment price continues to hesitate ABOVE the 11K support which is a sign that the selling activity is nothing more than noise.
If price reverses again in the low 11Ks, it is more likely to squeeze higher, faster because of all the new shorts that pile in, while over reacting to a single bearish candle that is in the midst of a broader bullish trend. Confirmation of this would unfold when the 12K lower high is taken out. Squeeze momentum can quickly push the 12,300 resistance boundary.
If we are wrong
If we are wrong, and selling momentum increases over the next day or two, then we get stopped out. We measured our risk in advance and once the trade is in play, it is up to the market to do it’s job, or not. The key take away here is do not be confused by a small magnitude pattern when the broader trend is still intact. If price sets up at the next support, we simply look to buy back in again.
There was a recent buy signal around the 15.25 area and now price appears to be hesitating off the 18 area resistance. This type of price action is not unusual since it is possible that it can be unfolding into a Wave 4 consolidation. These are often NOT simple corrective patterns and can probe as low as the high of Wave 1, and still maintain a broader bullish outlook.
For our purposes, we would measure risk from the 12.85 area support, meaning if price closes below that, it is probably a good idea to limit risk or exit a losing trade and wait for a new buy signal. As long as price maintains stability between 12.85 and the 18, it can develop into the Wave 4 consolidation which often leads to trend continuation or Wave 5.
Based on a price projection measured from the current bullish structure in play, the 25 level appears to be the next proportional inflection point. This means if it breaks out, it would be a good idea to distribute targets between the 20 and 25 area.
We assigned a low probability to this breakout attempt from the start because of previous price action around this location.
We had actually shared a buy signal in the form of a limit order at 11,500 while Bitcoin was flirting with the highs which had never filled. The limit order is now cancelled and we will wait for two potential scenarios:
1. The bearish momentum as a result of the fake out (all the longs who are caught from the top) follows through and takes out the 11K minor support. IF this unfolds, we will be watching for a test of the 10,400 inflection point. That is the ideal location for a new swing trade long in the event a buy setup develops there.
2. Bitcoin finds support around the low 11K area. IF a long setup appears, we will be open to an aggressive swing trade long, but will have to make risk adjustments because of the less than ideal location. We would consider a long here because the broader trend is bullish and long signals have a better chance of performing off of support levels (even if they are minor).
We will WAIT until one of those scenarios develops. These are within the rules of our swing trade strategy and taking a trade of any other reason would be trying to force it. Patience pays.
In these situations, markets will deceptively reward ineffective behavior (chasing) which can lead to a false sense of confidence. If you are in this coin, the best thing to do is reduce risk by taking partial profits until this thing produces a clear sell signal. If you are not in it, the best thing to do is WAIT for a retrace to the next support level.
Some key inflection points to consider: The 18 level is a proportional projection measured from the March low. Not only is it a psychological whole number, it is a location where the probability of selling activity is high. Even though there is no sell signal in place, this is the highest risk/lowest probability location to put on a new position. Buying into a potential top automatically puts you into a weak psychological position that often leads to exiting for a loss at the worst possible location (the low of the next support).
The 14.50 area is a minor support level as evidenced by the recent price activity in the area. A sharp retrace can find some support here, but it is important to WAIT for reversal structure in order to justify risk, because IF this level is cleared, the next inflection point is 11.50 followed by the 8.50 area. Can price retrace this far? It is possible, but the idea is to WAIT for such an opportunity, IF the market produces one. If not, the best thing to do is find a better opportunity in terms of reward/risk.
The herd mentality lures novice traders over and over again and is part of the market process. In order to win, you must not only be aware of it, but you must also know how to capitalize on it which requires counter intuitive thinking.
The clues of such an event have nothing to do with the economic situation and everything to do with the irrational tendencies of human nature.
The 1.3315 AREA is an important inflection point because it can lead to a failed low price formation. A failed low is when price goes proportionally lower than a previous low, but by a limited amount. The USDCAD is in such a location at the moment, even though bearish momentum continues. In order for us to justify taking risk in such a situation, we need to see a bullish reversal setup around the current level (1.3200s).
The reason why such a swing trade idea is attractive is because of the potential. It is proportionally within reason for this pair to revisit the 1.34 or 1.3500 areas within the next few weeks. As a short term momentum trader, all I am interested in is capitalizing on brief changes in momentum, no matter what the fundamentals or economists say.
In order to accomplish this, we measure extremes in sentiment as it expresses itself within price patterns. Right now the USDCAD is in such a high probability reversal location, but we need a clear setup in order to effectively measure risk. Do not lose sight of the fact the current price action is part of a broad correction of the rally that lead to the April peak. Another compelling reason to anticipate a significant bullish retrace from current levels.
The swing trade took one month to play out and we had to sit through a lot of noise, but the price structure never turned bearish, even though it appeared questionable at times.
The question everyone is asking: now a good time to buy? And in terms of our long-only swing trade strategy, the answer is NO. Why not? It looks strong now? The risk of retrace after such a move is very high. This is NOT a location that offers attractive reward/risk, even though price appears to be pushing higher.
Now that we are out of our position, we WAIT for the next long setup and this begins with first anticipating an inflection point. At the moment, that point is the 10,400 area. This is the previous range resistance, which is now likely to act as a new support. IF price can retrace to this area, and produce a setup, we will be prompted to share a new swing trade idea. It may find support sooner, but only price action can provide the evidence and there is nothing at the moment except for vertical candles.
This is the herd mentality in action. No one was excited about Bitcoin at 9200, or 9K but now it looks strong again. Markets are irrational and driven by the forces of greed and fear which often lead to the wrong timing. The effective thing to do in such a situation is lock in profits while the buyers are plentiful, even if it is just a portion of the position. Effective behavior and following a set of rules are what produce results, NOT chasing a market after it has made a significant move. Want to learn more? Visit the link to my website which you can find on my profile page.
Silver (and Gold) are not only traditional and historical currencies, they are also prime candidates for conspiracy theories and HYPE. Some things you may read or hear today: “There is no gold in Fort Knox”, or “There is absolutely NO physical silver available anywhere”, or “based on the Gold/Silver ratio, silver should be at 200 in a week or so”. And I’m sure there are many new ones as well, but these have been around for years, ATLEAST 10.
Meanwhile back in March, Silver was pushing lows at 12. My point is, DO NOT be consumed or motivated by any of these “logical” fundamental theories or infotainment oriented stories. Often these tactics are used to try and sell a product or service (buy these rare gold coins! or buy this special newsletter!).
The goal of this video is to provide a sensible perspective on how to participate in this run. Buying AFTER or into a vertical move of this nature is not favorable in terms of probability because often this type of momentum cannot be sustained. Instead, the more effective behavior would be to WAIT for an inflection point. Based on the recent price structure and history, that point is around the mid to low 18’s.
This price may or may NOT be reached when silver consolidates these current gains. Keep in mind, it is also possible for this market to find support higher, maybe around the 20 area BUT it would need to prove itself by producing a clear reversal structure and setup.
Another thing to consider is the instrument that you use to participate. CFDs are better for short term strategies because they often have a cost associated with them in the form of a “swap” or interest payment. This becomes costly over time which is why if you intend to invest over a longer period, there are a number of stock alternatives that will benefit: AG, FCM for silver and NEM, KL, GOLD, GDX for gold. There are also physical alternatives as well like minted coins and bars. I recently conducted a free webinar on the pros and cons of paper (derivatives like CFDs) vs. physical ownership (just visit my website found on my profile).
At this point the most effective thing to do is WAIT for the next retrace and measurable buying opportunity. Yes it requires patience in the face of a market that seems to be going higher without us, but patience has no risk and it’s free. Opportunities are infinite while our trading capital is not
And as yesterday’s forex session neared it’s close (Wednesday) we fully exited the position early at 1.1409. We were long from 1.1275. We usually try to let winners like this run unless the market provides a clear and compelling reason to exit sooner based on the RULES of our swing trade strategy.
So what changed? First, the session produce a bearish pin bar on the daily time frame. In and of itself that is not enough for us to make an adjustment or close a position. Making judgements on single candles often leads to getting faked out by price noise. What makes this pin bar compelling is WHERE it has printed. If you observe the peak established just a couple of weeks earlier, price did not successfully break beyond that resistance.
That failed breakout can be interpreted has many longs now caught, who will contribute to the selling pressure as they are stopped or margined out while new shorts are jumping in. Combined with the bullish reversal in the U.S. Dollar Index, you now have the recipe for an aggressive swing trade short. Why aggressive? It is counter trend which means IF we were to take this short, we would adjust our size and targets more conservatively in order to compensate for the risk of the broader trend reasserting itself.
Keep in mind, many in the forex world tend to believe you need to be an economist to successfully maneuver in these markets. This is nothing more than a misconception. All financial markets are driven by the same two irrational forces of greed and fear which means they can be timed by recognizing patterns of price “behavior”. We can trade the EUR/USD, Bitcoin, Gold, or stock the same way because we have only one objective in mind: to capitalize on short term price momentum.
There are two factors that we evaluate: price location and relative strength (not to be confused with RSI). Today, the NSX closed on it’s high and almost took out yesterday’s high as well. How much longer do you think the markets can run like this without a significant retrace? In terms of location, the risk of retrace is HIGH and even though it is possible to push somewhat higher, the potential is very likely to be limited. This means this is a time to be more cautious, defensive and selective, NOT “feeling safe”.
Why am I so contrarian here? There is no structural evidence that a broader retrace is in play, or even beginning. The red flag can be spotted when you compare other markets like the S&P 500 and Russell 2000 which are not pushing new highs like the NSX. The S&P in particular still has significant resistance around the 3200 area which means a proportionally large number of stocks are NOT participating in this race to the moon. A healthy rally is one where they are more or less in sync.
Keep in mind, I am not calling for a bear market, or a trend reversal. I am anticipating a healthy retrace and the nearest level of support on the NSX is the 10,200 area. If that is taken out, the next inflection point is around the 9750 area (historical market peak) and IF that is taken out, 9150 is next.
That is a significant move from current levels, but that is what we must consider in terms of risk. The retrace can come out of no where, and a chart will NOT provide any kind of “predictive” value until supports are taken out, and some kind of clear bearish structure is established which is a process that can take days or even weeks. In any case, the herd mentality is often the strongest at market turning points, learn to anticipate it, not participate in it.
Price has tested near the range low and established a price point at 8830. This stopped us from a recent swing trade idea that we shared around the 9625 area. As most novice traders will consider a stop out a negative event, we actually look upon it very positively. Why? Stops SAVE money in the long run.
What if Bitcoin went to 8K on some news? I can’t tell you how many times a stop loss order has saved us tons of money. If you get frustrated by a stop, that is a sign that you have not been in this game very long. Another thing that makes the stop easier for us to manage is we only had 1% of our capital at risk. Often traders misunderstand sizing and take positions that are proportionally too large for their account, making a stop out much more painful financially AND emotionally.
On Monday, our criteria for a new swing trade long was met and it became active upon the break of the 9225 level. Since then, it has been somewhat noisy, but this is in line with the character of a consolidation. What makes this position compelling is the fact that price found support off the 8830 area and did not even come close to the 8500 inflection point (sign of strength). Secondly, the reward/risk is much better since the position was taken closer to the range low rather than the middle of the range.
Testing the high 9Ks or low 10K area is reasonable and our initial target is strategically placed with this in mind (we use 3 targets). Can Bitcoin still fail? Sure, but a lack of momentum should NOT be confused with the nature of the broader trend which is BULLISH. In order to change our outlook, price needs to first compromise the 8500 support. Until then, we will continue to focus on managing risk and placing greater weight on buy signals, especially if they appear near key levels.
For those who bought the break out, this is not a comfortable position to be in, even though the broader price structure and fundamentals favor a bullish move. The reason? The reward/risk is NOT attractive here for a short term swing trade.
Do not let fundamentals or hype fool you or force you into some useless opinion. No matter how bullish gold “should” be, it can still very easily retrace and test of the middle of the broad consolidation that it has been gyrating within for weeks. Previous retracements have gone as low as 1670 and 1700 respectively even in this bullish gold environment. The bearish pin bar is not to be confused with a trend reversal, but it is pointing to potential bearish momentum at least for the next couple of days or going into early next week.
IF the bearish momentum follows through, it is within reason for price to test as low as the 1720s which would provide a much more attractive location for a new buying opportunity. Since we have only 1/3 of our recent XAUUSD swing trade (two targets were reached), we will let the position ride and see how it plays out. IF a new buying setup appears around the support level I just mentioned, we would be open to increasing our current position by 1/3 and look for another range break out attempt
A very common mistake is to buy into such an adverse move too early and take unnecessary pain or worse get stopped out. In this video I explain the inflection points that are favorable in terms of probability and what needs to happen in order for us to be able to justify a new long swing trade idea.
The first support area is around 1.2480. This qualifies because it has demonstrated previously that traders reacted there (old resistance area, now new support). There was even a hint of buying within the previous day’s candle (Friday) as it closed with small wick. This is not enough to buy into because while the trend is bullish, the momentum is still bearish and can lead price much lower. To avoid a premature entry our strategy requires evidence that others are buying as well and this comes in the form of a pin bar or inside bar. IF one of these setups does not appear, we simply continue to wait.
The second inflection point is the 1.2280 area. This is the key support relative to the bullish structure measured off of the recent swing low established in March. This is the level that allows us to define the trend as bullish, and to assign more weight to buy signals. Again, IF price reaches this area, it will prompt us to WAIT for a setup like I explained earlier. IF prices closes below this area, then we stand aside a reevaluate until the market can provide more clarity.
Keep in mind, we are ONLY interested in short term momentum. This has NOTHING to do with the economic situation or fundamental story behind this pair. Forex is notorious for emphasizing complexity and often makes it seem like you need a PHD in economics in order to participate effectively. This is a common misconception since ALL markets are typically driven by the irrational behaviors of greed and fear. By the time we recieve any “fundamental” information, it is obsolete in terms of acting on it. Technical analysis compensates for this by offering ways to measure the most up to date information there is and that comes in the from of price action.
Barring any Dollar bullish surprises, gold is showing clear bullish momentum going into the event but as I regularly remind our followers, DO NOT CHASE.
In this video I review a recent swing trade idea that we shared for the gold CFD (XAUUSD) which neared its first target in less than a day. This idea required a LOT of waiting for criteria which offered reward/risk that makes sense and it begins with knowing your price structure and levels, fundamentals will NOT provide much value for short term timing.
Technically, gold is strong and has been for months with a clear demonstration of higher lows and higher highs. Recent price action has been tricky because it has been gyrating in a 100 or so point range (1760 to 1650 area). This can be a painful hold IF you succumb to all the hype that always pushes unreasonable targets and conspiracy theories when gold is on its highs.
The trend is bullish, but in order to time effectively, probability of location comes into play. For us that was the 1650 area range low. Price recently touched 1670 and that was the first piece of the puzzle for our long idea. The second piece was the setup where we can measure reward/risk from.
Once that fit our criteria, THAT is when we can justify a new position. Keep in mind we recently had a similar situation (May 24th) that we let go and it appeared to run without us, but missing moves doesn’t cost anything.
IF Gold can maintain its current momentum and stay above 1700, it is likely to test the 1750 area over the next few days and possibly break into the low 1800s in the following week. Current prices (1715) is not a place to chase, either wait for a better price or step aside and wait for a better opportunity.
This type of selling off of this location is considered a failed high (or failed break out) which can be a signal of momentum change, NOT to be confused with a trend change. Based on our LONG only swing trade strategy, the 7695 key support continues to define the broader trend as BULLISH. These situations often stimulate a lot of reaction from bears who focus on smaller time frames, meanwhile it is much too premature to classify Bitcoin as being in a bearish trend.
Over the next few days we are looking for potential bearish momentum to take price back to our first inflection point around 8500. IF price can produce a reversal pattern here, we will be prompted to share a new swing trade long idea. Reward/risk would be very attractive since a bullish retrace back to the 10K is still within reason. IF price clears 7695, THAT is when we will consider making adjustments to our longer term outlook.
For the week ahead we are watching for a potential bullish reversal for a swing trade long off of the high 1.070’s or 1.080’s. A bullish pin bar along with some supportive structure (such as a mini-double bottom) would be ideal. Why not just place a buy limit order in advance and just wait to be filled? There is no way to know IF this market will hold the support upon another revisit. If it breaks, a dramatic move lower is likely to follow and there is no reason to get caught in that.
Upon confirmation of a reversal, we will be prompted to share a swing trade long idea. Since we are only interested in short term momentum, we do not consider any economic or fundamental information in our decision-making process. All eyes are on the USD, and it will have to prove which way it wants to go, and until it does, we simply prepare for scenarios and WAIT. It is better to be wrong and miss a move than it is to be wrong and lose money.
Although Bitcoin has yet to produce a new buy signal, we view this as a chance to add back to our long from 5750 (since we now only have 1/3 of the position left) Where are the inflection points? 8500 which was a previous resistance and 7695 which is the key support for the current broader bullish structure.
7695 Support Level
AS LONG AS 7695 is not compromised, Bitcoin is likely to reverse higher, and at least attempt to take out the 10,200 area high. This may take a week or so to play out, but BASED on the price structure and price action, this is the higher probability scenario.
Currently, the 8400 minor support needs to be taken out in order for a new sell signal to go into effect based on our long only swing trade strategy. This does NOT mean we go short, or even react, but it does provide a point of reference for those who prefer to reduce risk or take partial profits if long from lower prices.
The 7300 level is the key support that needs to stay intact in order for us to maintain a bullish outlook. IF price retraces to this area, it will provide an attractive inflection point to consider a new swing trade long idea (upon confirmation). Until this type of opportunity presents itself, we let our winners run, with our next target at 9750, followed by a third target in the next resistance zone (10K area).
ALSO, this is what we shared previously, for your reference:
Low 7K resistance area has asserted itself, BUT price is more likely to push higher in its next bullish retrace. Why? The 6425 level was a key resistance that once taken out, offered some kind of PROOF that the balance of order flow leans more toward the bullish side. The recent indecisive price action is consistent with this idea so far. Sell offs are not “stop and go”, fear is a powerful motivator and buyers do not appear to be getting absorbed around the current price level.
This will NOT be obvious on any oscillator, or any other random art on a chart. It is a concept that is based on price structure, proportions and forecasting methods that project forward, NOT focus on looking back. Does this mean price can’t pull back to 6K? No, but until Bitcoin provides evidence for that scenario to be likely, it is an event that we assign a low probability.
Using predetermined prices
We can do all the analysis in the world and it will not change the fact that markets are highly random. That means things look one way one minute, and then they change. Rules are what allow us to qualify opportunities and filter out NOISE. One of our simplest rules: using predetermined prices to enter or exit a trade. This helps to minimize the effects of emotional decision making and filters out many would be fake outs that often lead to a stop out.
Having preserved that capital allows us to continue to participate in the next quality setup. Evaluating and managing risk should not be confused with evaluating a market.
6425 is a key inflection point that must be taken out in order for price structure to provide evidence of enough buying activity for a retrace back to the high 7Ks or 8500 resistance. Otherwise, it is setting up for a new sell signal that can see a test of the 4K low over the next few days. With general fundamentals intact, the broader price location still serves as an attractive area for portfolio accumulation.