BTCUSD: Bears Lack Conviction. Support Zone Still In Play?

2018年1月31日

BTCUSD update: Price pushes into middle of broader support zone and is held up at the 9683 reversal zone boundary. In situations like this, recognizing the magnitude of the larger time frame levels allows for more effective decision making.

Small time frames look bearish. The move off of the minor resistance zone (11871 to 12316) looks dramatic compared to recent price action. Meanwhile price is not really going anywhere significant. For 15 days, this market has made little progress in either direction but gives the illusion that it is. Welcome to a more balanced market.

This price action is for the realm of the day trader. Small movements, reversals at minor levels and no big picture progress. In order to capitalize effectively on this price action, a great deal of skill is required. I am not day trading these markets, and I refuse to trade them of margin which means I cannot short them. So I base my perspective on the big picture and look to position myself to capitalize on the broader bullish move IF it returns.

Here is what I see: Price is gyrating between 10988 and 8656 (.618 area of broader bullish structure). It is also staying above the 9683 reversal zone boundary. In addition to that, based on the recent swing low established at 9989, there is now another reversal zone boundary at 9295. Within this area there are also a series of bullish pin bars that also happen to be within a minor support zone 10534 to 9989 (.618 area of recent bullish swing). As bearish as the most recent swing looks, (especially on smaller time frames) until price can work its way below all of this supportive structure, I am staying long and only looking to add.

Do not get your perspectives mixed up. I keep getting messages from people asking me why I am bullish when this market is so bearish. The time frames that look so bearish (1 hour or lower) do not carry much weight for my trading time horizon. I am looking for the broader move, and based on the current price action, we are just testing lows of a large magnitude support. Do not over react to dramatic movements often accompanied by extreme hype. Zoom out and start asking questions like: Is price breaking major supports? Is it making new lows with conviction? And most important: Have any major long term fundamentals changed? If the answer is no, like in this case in my opinion, then it becomes easier to see how these lows are a welcome buying opportunity for longer time horizon strategies like swing and position trades.

In summary, before making judgements or decisions, you must first have a point of reference. For me, I am staying focused on the big picture because that is the time horizon I am positioned on. Having this perspective allows me to see through the immediate noise that many get caught up in. At this point, I am waiting for candlestick reversal formations or price patterns to develop in this area in order for me to buy more. IF the market keeps selling (below 8656) then I will not take any action and hold what I have. The only reason why this works is because I am not using margin and my sizing is carefully calculated. Like I have written in previous reports, it is just a matter of bullish catalysts taking hold and driving the next leg. See beyond the herd, do not be part of it.

Questions and comments welcome.