BTCUSD: Triple Bottom But Facing Bearish Momentum.

2017年12月30日

BTCUSD update: Triangle and minor support broken as bearish momentum carries this market to retest the 11600 low. Price is now hesitating at what could develop into a triple bottom support. Buying now is still attractive for longer time horizon positions.

In my previous BTC report, I highlighted the lower high and what possibilities it implied. The market chose the bearish scenario which now offers more attractive prices for longer term investing. Like I have explained previously, buying fractional positions on lows does not require precision, only the acceptance of the risk.

The 10988 to 8656 area is the .618 of the broader bullish structure that I have written about previously. A retest of this zone may be fast since it now offers a reversal zone extension boundary of 9683. I am not a fan of placing and leaving limit orders in the market because of the random nature of such a tactic, but this price area offers one of those rare exceptions. As long as you have a defined investment size, and you are fractionally building a position, leaving a limit order below the market allows you to capture prices that may only be available for a very limited time. The fractional size is what keeps your risk under control, and not a stop order since there is no reference structure at the moment. The most important thing to keep in mind is this: you must be able to accept the possibility that price can go much lower than expected. Bottom picking is random, and is not in our control, but the amount of risk that we take is. The averaging technique is for longer time horizons, and a positive long term outlook on your part. This same tactic can lead to wiping out your account if done on margin or irresponsibly.

So, on that note, I have placed a limit order to buy a fractional amount at 13150 (Coinbase). It is long term. No stop or target. (You must make your own adjustments based on which ever exchange you use.)

What about the triple bottom at the 11600 area? Price is attempting to reject the support, BUT there is no relevant confirmation of a price reversal. The only attractive factor in this situation is that price has dramatically rejected this area twice before. Again buying into a small increment does not require precision, but if you are looking for a short term trade, waiting for the close of a reversal candle such as a pin bar or inside bar at least offers price stability.

Don't forget there is significant short term bearish structure in place that can still lead to lower prices. The lower high at 16350, the lower high at the 15131 and the 13520 resistance level which is now the .382 of the current bearish structure measured from the 16350 high. If price is going to recover, a break of the 13520 level will be the first relevant sign to look for. Buying below this price is not a bad idea for an investment rather than a trade, but lower prices are likely until this change in momentum materializes. (10700 or lower is realistic).

In summary, there is no question this market is now in a more attractive price area when it comes to a longer term investment horizon. The market is a harsh teacher. 6 weeks of constant new highs reinforces bad habits and extremely warped expectations, especially from newer participants who have no reference point for what a realistic market is. Now is when the herd of buyers from 18K who expected 30K get shaken out and donate to the traders who have a stronger understanding of financial markets. It's not "different" this time. Euphoric markets are especially driven by the same factors every time: Greed and fear. Those who were not sucked into the euphoria can now capitalize on the fear. Buying a low doesn't guarantee you are buying the bottom because bearish momentum can take prices even lower. Having a process for managing risk and making decisions based on the market's intent is what will facilitate long term trading and investment success. Not "gut" instinct.

Comments and questions welcome.