BTCUSD Perspective And Levels: Runaway Train?

2017年11月20日

BTCUSD update: New all time highs as I write this, right into the 8250 target area. The next level to watch for is 8500 which is the top boundary of the reversal zone.

Yesterday I updated my previous BTC report, pointing out that price was in the process of breaking out of the bull flag formation and on its way to 8k. This price action is very clear and very strong. If you are long from lower prices, this target area is a good place to lock in some profit. Keep in mind when I write that, I DO NOT mean sell your whole position. Taking some profit at highs is a good habit because it reduces risk and you are selling while you can, and NOT when you have to. Give some of it to the buyers while they are buying.

Remember, the higher it goes, the risk of retrace increases that is why you do not want to buy highs, you want to sell them. This does NOT mean this market is a short either. After the .618 resistance area was cleared without any bearish structure in sight, I have been warning about shorts. There is no structure on the larger time frames or breaks of any minor support levels. Even though the risk of retrace is high that is not enough to justify a short. There are market conditions where the risk is unattractive for both longs and shorts and this market is in that situation now.

If you want to participate in this action, the only way to keep risk within reason is to day trade. I write this over and over. The bearish structure will appear on a 15 minute chart, and a reasonable stop is 30 to 50 points on such a short time horizon. So is your profit target. If you risk 30 points and you are up 50 points in a matter of an hour, you take the profit, not try to hold it for a home run. That is why I also repeat, IF you do not have a solid day trading plan and you do not know how to define stops and targets on small time frames, then do not trade this market at all. It is too fast and requires an agile mindset.

What is the reversal zone? I have been referring to this as the "fakeout zone" in previous reports. It is an extension that is measured from a range high or low. In this case, a measurement from the 5400 low puts the reversal zone boundary at 8500. On top of that, price has reached the 8250 target area which is a 1.618 extension projected from the 6300 low. Add to that, the bullish structure that has lead to this high is a clear impulse wave with 5 distinct legs. Together all this means price is in a convenient area to present a bearish reversal pattern or structure. This is why I say take profits, but do not short until the larger time frame structure is present (a double top, lower high, pin bar).

Another thing to consider, shorting the high in an attempt to get in at the top is the same as buying a market when it is making new lows in an attempt to catch the bottom. It is a losing proposition because the one time that you are right does not cover the losses for the other 5 times you were wrong. If this market is going to retrace, it will begin with the initial wave, followed by the failed high or lower high. The retest and failure is the best time to short, so as long as the market keeps pushing highs, shorts should not be taken on larger time frames.

In summary, this market is making all time highs which is not that surprising considering the recent bullish structure. While the world will be celebrating this event, keep in mind price is within the reversal zone (below 8500) and is a very risky buy or sell at the moment. Since I do not short these markets, my only choice is to buy, and the level I am most interested is the 7180 area (.382 of bullish structure). A bullish reversal on a smaller time frame is likely to offer attractive reward/risk for a swing trade at that level while the market likely aims to retest the high once more. Overall, do not worry about missing out on longs or shorts, the opportunities will materialize, just wait, recognize and repeat.

Comments and questions welcome.