Bitcoin: Waiting For Reversal.

2022年2月20日

Bitcoin breaks the 39.5K support which now increases the probability that the 35K or 30K support areas can be tested in the coming week. What is the most effective way to capitalize on this? In this article I will explain what I am looking for in terms of a high probability swing trade idea. If you are into reacting to the obvious, then there is no reason to read this article any further.

The 39.5K support is clearly compromised, and while this area is still attractive for longs, there is NO reason in terms of price action to take any risk here in terms of a swing trade. While it is very possible price can find support before testing 35K, it has to provide some form of confirmation and some way to clearly measure risk. Price action at the moment shows no such information. Stepping in front of this (which is tempting) puts you in front of significant bearish momentum.

Buying into this environment makes more sense when carefully accumulating inventory (SMALL batches). Keep in mind, you must have a VERY open mind because IF bearish momentum continues, and 30K manages to break, a test of 28K is possible. I wrote about this type of strategy in an article for this community a few weeks ago (buying more into weakness).

If price continues without any specific reversal formations, then 35K is the next AREA to look for bullish reversals. Why look for longs when this market appears to be so weak? A reversal formation around the 35K area will establish a broad higher low formation, which if anything, offers an attractive probability and reward/risk for a swing trade. Preparing for opportunities is how to effectively play this game, NOT reacting to what you "see". If 35K breaks, then 30K become the focus point for the next potential high probability reversal formation.

A major problem I see with retail trader is they put too much emphasis on the wrong information and fail to recognize important relationships. Right now, Bitcoin appears to be aligned with the S&P. On the surface, that means nothing to most people. What most people don't realize is that the S&P is going to be under pressure thanks to a rising rate environment (and now unexpected geopolitical variables). HOW COME none of the "EXPERTS" were calling for anything like this two months ago when the S&P was pushing highs? While I could not pin point these factors either, I knew ONE thing, and that was the RISK at those price locations was very HIGH. Read my articles on here from that time.

While shorting may seem like the right thing to do, it is the levels and risk that justify it or not, NOT a "bearish" trend on a chart. Stop reacting to the OBVIOUS. The simplest idea I can offer is this: understand how people are likely to behave at particular levels, and use the overall structure to shape expectations appropriately. Shorts are better from resistance levels, NOT SUPPORTS.

Thank you for considering my analysis and perspective, I hope you find it helpful.