BTCUSD: The Face Of A Bear But Heart Of A Bull.

2018年8月19日

BTCUSD update: It appears price action cannot make up its mind upon first glance. A break out attempt around the 6600 level fizzles out as short interest climbs even further. On the surface this may "feel" bearish, but the internals are still pointing to higher prices.

At S.C., we focus on probabilities, not feelings. Feedback from a cross section of our members suggests that the general consensus expects price to collapse once again. When you compare this to the fact that short interest is increasing while price is not pushing lows, it is more of an indication of a market brimming with hidden strength.

Increasing short interest means bears are continuing to pile into the obvious trade. And this makes perfect sense when price is pushing new lows, but the 5750 low established in June is still intact. If shorts are selling more, and price is not making progress, what do you think that means?

Clearly there is more buying than selling, but it is not obvious yet. In other words, this structure is most likely a bear trap. If price continues to hold above 6K, this bear population will be naturally forced into buying. When this happens, it often leads to a vertical candle that results from the numerous margin liquidations that follow.

At S.C., we acknowledge the formations and patterns that are visible, but we also consider what is not visible. And that is the probability of the general location. Considering both perspectives is what builds context and helps to align decision making with market intent, not our ego or opinions.

What if we are wrong? That is a possibility and why we protect positions and our portfolios with defensive measures like smart position sizing and stop orders. Price can reasonably retest the 6K level, but we are willing to risk the profit that we have in our recent swing trade in favor of the broader probability.

In summary, a chart is a visual representation of order flow. And order flow is naturally governed by the irrational forces of greed and fear. The high element of randomness makes taking chart analysis at face value an even tougher game to play. This is why it is so important to always consider what the chart is saying, and what it is not.

In the case of Bitcoin, it is showing bearish information within the midst of a bullish location. Bearish information is most useful at resistance levels or highs, not lows. And that is the context we use to weight our analysis appropriately. Our objective is to bet on probabilities which is often on the opposite side of the herd mentality. Which side do you choose?