Bitcoin: Ask Where Not Why.

6 thg 3, 2022

Bitcoin could not break the 45K resistance over the previous week. This establishes a lower high consolidation and increases the chances of a lower low to come. The recent price spike was nothing more than a REACTION to geopolitical drama. The fact that the bullish move was given back just as quickly implies that there is NOTHING supporting this market, especially in the face of a rising rate environment. Here are some scenarios to consider for the coming week:

1. Bitcoin establishes support at the range low (35K) and confirms a reversal. This would be ideal for a SWING trade. It would be aggressive because it is going against the mid term structure which is bearish. While the long term trend is still bullish, the current environment does not favor any kind of spectacular rally any time soon. This means profit potential and expectations should be very CONSERVATIVE. (Anything over 1:1 R:R is a WIN).

2. Bitcoin breaks 35K and tests the 33 to 30K support area. The mid term structure favors this, but there is never a guarantee that this will play out. If you are into shorting BTC, selling into the 35K support in hopes that it breaks is a VERY high risk position because price can easy find some buying activity for any reason. Short risk was MOST attractive at the 43 to 45K resistance, NOT the 35K area. Playing the breakout to 30K is plausible but my point is: you still face high reversal risk and must carefully monitor and be prepared to get out if a reversal appears. Keep in mind the 35K to 30K area is a very conflicted location because of the broader trend support levels here.

3. Bitcoin gyrates between the 38K and 40K area and lures more reactive traders. Short term structure is range bound in the mid point of a range is the MOST random location. In these situations it is more effective to either anticipate to buy the range low or sell the range high. Anything in between is the equivalent to playing a slot machine.

Why do markets go higher or lower? If you attempted to answer this question with a logical explanation, your thinking is flawed. The effective answer is: WHY does not matter. Attempting to figure out why focuses your attention on irrelevant information. Focus on looking ahead and asking WHERE price is more likely to act in a particular way. And MORE importantly, how to quantify the RISK at such a location.

Thank you for considering my analysis and perspective, I hope you find it helpful.