Bitcoin: Relief or continued crash?
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At the beginning of the this week I still looking for some relief if we could keep above the 4100 area. That failed hopelessly, as we closed below the inside bar range that was signalled by the green reversal bar. I closed my short around 4000 (which was perhaps premature, but at that time I assessed the upside risk to be larger than the downside risk. View prior posts to see why I thought so.), I also did not re-enter from the indicators re-entry signal (the red triangle) because of the same reasons. Here I’m proven wrong, but that’s ok, I’d rather be wrong by not entering a trade than be wrong when entering a trade..
My outlook at the moment is that it is still safer to be on the sidelines than it is to be in the market. Trading short I feel is very dangerous at this point, as we are close to long term support (and the 200 week (and 50 month) MA). The chances of breaking that support directly after breaking the 6000 support are not something I’m willing to trade.
Let’s move to the charts to get a better understanding of where we are, what the next couple of days may bring, and most importantly: if that is something I can trade.
Weekly
This weeks candle does not look good. The indicator signalled last weeks candle to be a possible reversal bar (bar coloured green), but as this weeks candle trades below last weeks low that signal becomes invalid. We still have a few days before this weeks candle closes, and technically I need a close below the lows of the reversal bar to invalidate the signal, so I’ll have to wait until Sundays close before the weekly chart can give me any more clarity.
We are coming down to the 3200-3000 range, where we’ll meet the 200 week MA, which if it will possible (hopefully?) hold as support will perhaps cause a relief rally.
Nothing but ifs and maybes here on the weekly chart, and ifs and maybes lead to hopes-and-prayers trades, and hopes-and-prayers trades make me very unhappy.
Daily
On the daily chart we can see a clean break of the IBR derived from the green reversal bar (and reversal tab) signal, which invalidates the countertrend signal. We have a strong (orange) overextension signal on todays candle, and the body and wick are completely below the 3 period EMA. These are all signs of a very overextended market, but that doesnt’ necessarily mean that the market is going to reverse (now).
Todays candle is shaping up to be a doji/hammer candle, but we’ll have to wait for that to close for me to take any serious signal off it. There’s a good amount of distance between price and the trend line which again cause me to believe that the 3000 area support won’t break right now.
We have an overextend market near support, not at support, but near it. And this makes it hard to interpret any signals in a clean manner. We may go down to support, but that may not happen in the coming weeks. We can bounce from here into a relief rally, or range here for a while before the market decides on a direction. The daily chart does not really provide more clarity on what the market is about to do, apart from displaying conditions of overextension. Let’s go bit deeper on the lower timeframes
12HR
A quick look at the 12 HR chart, as it sometimes gives a bit more information than the daily chart. Here I’ve circled the green reversal tabs that the indicator prints, and on the 12HR chart you can see that these at least signalled some kind of relief from the drop. The indicator also shows me the same overextension as the daily chart: weak (purple signal), but entire candle is below the 3EMA. If this candle prints a green reversal bar signal, the break of the upper wick of the candle could signal a relief rally from here. But again, if if if.. This candle closes in 10 hours, and a lot can happen in 10 HRs, so there’s no tradable setup here. However, more signs point to relief from the drop than to a further crash.
4HR
The 4HR chart lines up with the higher timeframes, showing overextension and possible reversal. wh
Trading the 4HR chart on this indicator you should consider taking profit from the short you entered at 3740 or lowering you stop to the top of the reversal bar signal at 3420. Taking a countertrend trade here is possible, but risky as we’re not at support but near it. The setup would be off the orange overextension signal, green reversal bar and doji candle. The trigger would be if we break 3421, and then profit taking would be around 3670, or from bearish signals from the indicator. Placing the stop is tricky here, you could go for swing low (so around 3200), or below the LTS which would be around 2900. This makes the trade very risky, and if I were to take it (which I am not) I would play it with a liquidation around 3200. Not a stop, because I don’t want my stop to trigger there but only get filled at 3000, but a full liquidation. Also, a very small risked position size compared to the amount I risk on a trend trade.
I won’t trade this because we are not a level of support (to me). If I would have seen the same thing happen at 3200 or 3000, I would defiantly trade the countertrend, because the signals give a a reaction from a level. And that is one of the requirements for me to enter a trade, according to the strategy. Signals aren’t enough, I need signals at levels for me to consider a setup.
1HR
The 1HR chart again agrees with the higher timeframes. Overextension signals, reversal bar, and reversal candlestick all point to overextension.
If you’re trading this indicator on the 1HR chart and decided to take the countretrtrend, you’d be triggered into a long now. A move towards the 3500 area does look likely here, or perhaps we may just linger around the 3300 for a while.
You should only take this countertrend trade if, according to your analysis, 3300 is an important level of support.
Conclusion
All timeframes indicate an overextended market, but as we’re not a key level of support in my opinion, I can’t take a countertrend trade off any of the signals. If we reach down to 3000 and find signals there I will definitely look to go long. I think 3200-3000 is also the area where price will go, but I think that will probably not happen today or tomorrow. The lower timeframes may need to create some breathing room before price goes down again.
My goal is not to look for an entry into every move bitcoin makes, but finding safe entries into high probability moves that will make you profitable in the long run.
At the moment it too uncertain for me to forecast what will happen next. I don’t see 3000 breaking just yet, but it may take a while before we even get there. The safe place now is on the sideline, no point in risking the profit I took from the short.
Shorts here should consider taking profit and tightening the stop, but going long here is too risky for me.
If you enjoy these setups and analysis please like and subscribe. It’s the easiest way to support my work and get spread this content further :)
If you want to tryout the indicator and strategy, follow me and drop a comment or pm and I’ll get you set up.
Stay calm, and happy trading!
More information on the indicator can be found below:
My outlook at the moment is that it is still safer to be on the sidelines than it is to be in the market. Trading short I feel is very dangerous at this point, as we are close to long term support (and the 200 week (and 50 month) MA). The chances of breaking that support directly after breaking the 6000 support are not something I’m willing to trade.
Let’s move to the charts to get a better understanding of where we are, what the next couple of days may bring, and most importantly: if that is something I can trade.
Weekly
This weeks candle does not look good. The indicator signalled last weeks candle to be a possible reversal bar (bar coloured green), but as this weeks candle trades below last weeks low that signal becomes invalid. We still have a few days before this weeks candle closes, and technically I need a close below the lows of the reversal bar to invalidate the signal, so I’ll have to wait until Sundays close before the weekly chart can give me any more clarity.
We are coming down to the 3200-3000 range, where we’ll meet the 200 week MA, which if it will possible (hopefully?) hold as support will perhaps cause a relief rally.
Nothing but ifs and maybes here on the weekly chart, and ifs and maybes lead to hopes-and-prayers trades, and hopes-and-prayers trades make me very unhappy.
Daily
On the daily chart we can see a clean break of the IBR derived from the green reversal bar (and reversal tab) signal, which invalidates the countertrend signal. We have a strong (orange) overextension signal on todays candle, and the body and wick are completely below the 3 period EMA. These are all signs of a very overextended market, but that doesnt’ necessarily mean that the market is going to reverse (now).
Todays candle is shaping up to be a doji/hammer candle, but we’ll have to wait for that to close for me to take any serious signal off it. There’s a good amount of distance between price and the trend line which again cause me to believe that the 3000 area support won’t break right now.
We have an overextend market near support, not at support, but near it. And this makes it hard to interpret any signals in a clean manner. We may go down to support, but that may not happen in the coming weeks. We can bounce from here into a relief rally, or range here for a while before the market decides on a direction. The daily chart does not really provide more clarity on what the market is about to do, apart from displaying conditions of overextension. Let’s go bit deeper on the lower timeframes
12HR
A quick look at the 12 HR chart, as it sometimes gives a bit more information than the daily chart. Here I’ve circled the green reversal tabs that the indicator prints, and on the 12HR chart you can see that these at least signalled some kind of relief from the drop. The indicator also shows me the same overextension as the daily chart: weak (purple signal), but entire candle is below the 3EMA. If this candle prints a green reversal bar signal, the break of the upper wick of the candle could signal a relief rally from here. But again, if if if.. This candle closes in 10 hours, and a lot can happen in 10 HRs, so there’s no tradable setup here. However, more signs point to relief from the drop than to a further crash.
4HR
The 4HR chart lines up with the higher timeframes, showing overextension and possible reversal. wh
Trading the 4HR chart on this indicator you should consider taking profit from the short you entered at 3740 or lowering you stop to the top of the reversal bar signal at 3420. Taking a countertrend trade here is possible, but risky as we’re not at support but near it. The setup would be off the orange overextension signal, green reversal bar and doji candle. The trigger would be if we break 3421, and then profit taking would be around 3670, or from bearish signals from the indicator. Placing the stop is tricky here, you could go for swing low (so around 3200), or below the LTS which would be around 2900. This makes the trade very risky, and if I were to take it (which I am not) I would play it with a liquidation around 3200. Not a stop, because I don’t want my stop to trigger there but only get filled at 3000, but a full liquidation. Also, a very small risked position size compared to the amount I risk on a trend trade.
I won’t trade this because we are not a level of support (to me). If I would have seen the same thing happen at 3200 or 3000, I would defiantly trade the countertrend, because the signals give a a reaction from a level. And that is one of the requirements for me to enter a trade, according to the strategy. Signals aren’t enough, I need signals at levels for me to consider a setup.
1HR
The 1HR chart again agrees with the higher timeframes. Overextension signals, reversal bar, and reversal candlestick all point to overextension.
If you’re trading this indicator on the 1HR chart and decided to take the countretrtrend, you’d be triggered into a long now. A move towards the 3500 area does look likely here, or perhaps we may just linger around the 3300 for a while.
You should only take this countertrend trade if, according to your analysis, 3300 is an important level of support.
Conclusion
All timeframes indicate an overextended market, but as we’re not a key level of support in my opinion, I can’t take a countertrend trade off any of the signals. If we reach down to 3000 and find signals there I will definitely look to go long. I think 3200-3000 is also the area where price will go, but I think that will probably not happen today or tomorrow. The lower timeframes may need to create some breathing room before price goes down again.
My goal is not to look for an entry into every move bitcoin makes, but finding safe entries into high probability moves that will make you profitable in the long run.
At the moment it too uncertain for me to forecast what will happen next. I don’t see 3000 breaking just yet, but it may take a while before we even get there. The safe place now is on the sideline, no point in risking the profit I took from the short.
Shorts here should consider taking profit and tightening the stop, but going long here is too risky for me.
If you enjoy these setups and analysis please like and subscribe. It’s the easiest way to support my work and get spread this content further :)
If you want to tryout the indicator and strategy, follow me and drop a comment or pm and I’ll get you set up.
Stay calm, and happy trading!
More information on the indicator can be found below:
Заметка
Directly after writing the analysis the price dropped to around 3200 and we rebounded nicely. The candle closed as a reversal candle, and todays candle is starting off on a green reversal bar. I think we’re getting another shot at a relief rally now. The setup I’m looking for is for todays candle to close as a green reversal candle around the 3500 area. If that happens I have the three signals and a level: overload signal, reversal candle and reversal bar signal, and the reaction at 3200. Then I can look for a breakout level to enter long towards 4400 and eventually 5000 and post the setup if it becomes an option.
Entering here can also be done, very speculativly, with a stop below 3000. I’m waiting for the setup to confirm though.
The shorts seem quite over leveraged too at all time highs, and the market won’t allow all these shorts to profit, so a squeeze seems somehitng that is bound to happen very soon. Hopefully Sunday, so we can allow the setup to confirm today…
Заметка
The situation has become a bit more clouded as yesterdays rebound seems to be losing strength already. On the daily chart I'm still looking for today to close around 3500 and for the indicator to give me the green reversal bar to look for a long entry.
The lower timeframes show me that the bounce did not have enough strength to make more upside immediately, and we may be looking for more downside first. A critical level for me is around the 3350. If we get a 4HR close below that I think we'll go down to 3000 before we see any relief. To risky to trade at the moment, my bias is still to look for a long trade if we get the daily setup I'm looking for. If we go down to 3000 I'll have to re-evaluate. If I see signs of a bounce there I'll re-attempt the long trade if I get the right setup and signals. If we reach 3000 and don't get a clear bounce there might be a short on the table again.
Заметка
There's little hope for todays candle closing above 3400n Let's see how far this drop goes, where the reaction comes, and what the reaction is. For now I'm no longer looking for a long setup. The sidelines is where i'm at, waiting to see how this plays out.Заметка
Got a close just below 3500 and a green reversal bar, so the long setup is valid:
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