BTCUSD - Trading the potential bear trap at 12k
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BTC has been going great guns the last 10 days, quickly making us forget that even by BTC standards, we are in the mother of bear runs.
Most agree that we are entering a crucial period formed by the convergence of several key areas around the 11.5-12k area, in order of importance:
- Diagonal down resistance line formed from 20k ATH and 17k bear trap
- 1D 50EMA, not broken since 15 Jan
- Head and shoulders projected target
- 0.78Fib of bear wave 5
- Key resistsance support areas touched on the way to 20k, twice in bear wave 2 and numerous times in bear wave 3 and 4
If we are going to turn and go back into the mega bear run, 11.5-12k will surely be the place. It creates a great risk reward for bear traders with a stop loss at 13k (top of bear run 4) and targets of 9k (25%), 6k (90%) and 4k (190%).
My conviction is that we are heading to 50k in Q2 but need to establish the bottom before doing so. This would either be with a double bottom at 6k or by firming up the support around 8k-9k. I am also open to the view that we could go lower with the bear diagonal trading channel indicating 4k, which would also question the 50k target.
How do we get to 11.5k - 12k from here?
There are various paths, but the most likely are:
1) Continue up from here without any minor correction, forming the ABC wave pattern. This is indicated in grey on the chart above. If this happens, the indicators on almost all the time frames will be overbought. The drop is likely to be aggressive and sharp, back to 9k or lower. The alternative is that this creates the third wave for a small retrace before blasting through 13k and onto Mission Accomplished in the fifth wave.
2) A return back to the trading channel formed over the last 10 days, creating the fourth wave before going up to 11.5k-12k on the fifth wave. This may lead to a smaller retrace with an ABC wave that touches the 4th wave at its lowest point.
3) Trade side ways for more than 5 days, going through the long term diagonal resistance line. This scenario could change a lot of my assumptions and I'll revisit my plan if this happens.
My plan
I have core holding which I do not plan to touch. After selling my trading pot around 16k and the 13k turn, I'm now pretty much fully invested with my trading pot, buying on the way down at 9k and 8k and the way up at 6.7k and 8.8k for an average of 8.5k. I also had a trade at 8k on the way up which got exited on a stop loss.
I will be exiting my trading pot position around 11.5k for a 35% profit.
If we continue up past this key area I will re-enter at a break out around the 13k level. The only hesitancy I have is the bull trap could form after 13k rather than the 11.5-12k area and so I will need to manage this with an appropriate stop loss. Selling at 11.5k and buying at 13k will cost around 15%. This is a simple insurance premium or short trade (without going short on margin) with a stop loss. Without selling, the levels down from here are likely to cost 20% (9k), 50% (6k) and 65% (4k). In the event of a correction, these are the areas to buy in on signs of bottoming out.
This is my trading pot, so I can't just HODL, I must manage risk. A 50% loss can only be covered with a 100% gain. It may blow through and cost me my premium, but given my analysis and MY position, it seems like everything is stacked in favour of ME making this trade.
Most agree that we are entering a crucial period formed by the convergence of several key areas around the 11.5-12k area, in order of importance:
- Diagonal down resistance line formed from 20k ATH and 17k bear trap
- 1D 50EMA, not broken since 15 Jan
- Head and shoulders projected target
- 0.78Fib of bear wave 5
- Key resistsance support areas touched on the way to 20k, twice in bear wave 2 and numerous times in bear wave 3 and 4
If we are going to turn and go back into the mega bear run, 11.5-12k will surely be the place. It creates a great risk reward for bear traders with a stop loss at 13k (top of bear run 4) and targets of 9k (25%), 6k (90%) and 4k (190%).
My conviction is that we are heading to 50k in Q2 but need to establish the bottom before doing so. This would either be with a double bottom at 6k or by firming up the support around 8k-9k. I am also open to the view that we could go lower with the bear diagonal trading channel indicating 4k, which would also question the 50k target.
How do we get to 11.5k - 12k from here?
There are various paths, but the most likely are:
1) Continue up from here without any minor correction, forming the ABC wave pattern. This is indicated in grey on the chart above. If this happens, the indicators on almost all the time frames will be overbought. The drop is likely to be aggressive and sharp, back to 9k or lower. The alternative is that this creates the third wave for a small retrace before blasting through 13k and onto Mission Accomplished in the fifth wave.
2) A return back to the trading channel formed over the last 10 days, creating the fourth wave before going up to 11.5k-12k on the fifth wave. This may lead to a smaller retrace with an ABC wave that touches the 4th wave at its lowest point.
3) Trade side ways for more than 5 days, going through the long term diagonal resistance line. This scenario could change a lot of my assumptions and I'll revisit my plan if this happens.
My plan
I have core holding which I do not plan to touch. After selling my trading pot around 16k and the 13k turn, I'm now pretty much fully invested with my trading pot, buying on the way down at 9k and 8k and the way up at 6.7k and 8.8k for an average of 8.5k. I also had a trade at 8k on the way up which got exited on a stop loss.
I will be exiting my trading pot position around 11.5k for a 35% profit.
If we continue up past this key area I will re-enter at a break out around the 13k level. The only hesitancy I have is the bull trap could form after 13k rather than the 11.5-12k area and so I will need to manage this with an appropriate stop loss. Selling at 11.5k and buying at 13k will cost around 15%. This is a simple insurance premium or short trade (without going short on margin) with a stop loss. Without selling, the levels down from here are likely to cost 20% (9k), 50% (6k) and 65% (4k). In the event of a correction, these are the areas to buy in on signs of bottoming out.
This is my trading pot, so I can't just HODL, I must manage risk. A 50% loss can only be covered with a 100% gain. It may blow through and cost me my premium, but given my analysis and MY position, it seems like everything is stacked in favour of ME making this trade.
Ghi chú
A small pull back, but this is not the key one I am watching for. I've pre-booked sell orders from 11.2k onwards. The first was executed at 11.2k.
Ghi chú
BTC appears to have created a new diagonal up support line (green), which is projected from the 6k low and wave 2. I'm comfortable that we have completed wave 3 and I am planning for two potential paths over the next couple 48 hours.1) Wave 4 complete
We may have completed a small wave 4 retrace and be moving up to create the wave 5. This would take us to the top of the danger zone at
12K and convergence of the resistance I outlined above. 2) More of wave 4 to come
We are seeing RSI divergence on the 4HR chart so we could break the diagonal up support line (from 6k and wave 2) and drop a to the support at 10k, which would also meet with the 0.382 retraction of the recently completed wave 3 and the 4HR 50EMA. This would then give BTC the spring to challenge the diagonal down resistance line (from 20k ATH) at around 11.3k. There is less convergence of resistance here, which may make it easier for BTC to break it down, but may also lead to a bull trap on a breakout of it.
My plan
No change in my plan at the moment, but if scenario 2 unfolds I am likely to move my sell prices lower so that I am out of the game before the 11.3k key area.
Ghi chú
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