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.