Bitcoin 9K Support Break Means Adjusting To The Bears?

٢٩ سبتمبر ٢٠١٩

Bitcoin breaks below the 9K range support and after 3 months, this market is showing some progress. I wrote in previous articles that such an event would allow us to adjust our outlook and that is what I am going to share today. Keep in mind, our perspective is focused on longer time frame strategies such as swing and position trades.

If you are capable, avoid all the hype, drama and attention seeking marketers during such dramatic moves in ANY market, not just Bitcoin. They will use this as an opportunity to attract attention, clicks and conversions which means there will be a tendency to over exaggerate their claims, projections, targets and their returns. From a realistic technical perspective, there is NO way to know if Bitcoin is going to 5K, although the possibility has increased.

There is also a concept call "random reinforcement" which means the market will tend to reward ineffective behaviors while punishing effective ones. This is particularly true for a small sample of trades, which lures inexperienced traders into believing their outcome is a result of their skill or lack thereof. I mention this because many will brag about their 300% gain on their short day trade, but if they took this trade on some low probability setup that worked this time, they will look credible. If you want to perform consistently, you MUST focus on developing your process and that begins with forming a market relevant PERSPECTIVE and NOT being fooled into copying someone else's ineffective habits.

I say market relevant because it must come from purely market generated information, not someone's opinions, your feelings or a reaction to news. And you can find this pure information on your chart which brings me to how we adjusted our perspective based on the 9K support break.

Keep in mind, we manage two strategies: swing trades and position trades. We are only interested in information that will guide our decisions on these time frames. This is VERY important because by focusing on information relevant to these time frames ONLY, we avoid tons of confusion, stop outs and fake outs. We do NOT consider smaller time frame trends (appropriate for day trades) and we DO NOT operate on the short side of this market. These guidelines are what keep our performance consistent, NOT some magical chart setup.

1. The 9K break provides evidence that bearish momentum is in play. When a large magnitude range support breaks, there can be a continuation move because of the disproportionate amount of longs that are in the process of being forced out (margin liquidations), or shaken out. Along with that, new shorts will jump in on their smaller time frame signals. For our swing trade strategy, this means we STEP ASIDE and WAIT for stability to develop which can take days to weeks.

2. The broad 50% retrace level around the 8500 level has also been compromised. This is a short term bearish sign and increases that chances of price testing the next support zone which is the 7275 to 5464 REGION (relative to the 61.8% retrace of 3150 to 14K). This does NOT mean price WILL test these lows, but IF it does, it would be the next area that favors a greater possibility for bullish reversal patterns for swing trades AND position trades.

3. Although short term momentum is now bearish, this does NOT equate to the broader trend. In terms of Elliot Wave, a Wave 2 corrective structure (which is most likely what Bitcoin is in) can retrace 100% of Wave 1 (which points to the 3150 low) and still be categorized as a corrective move within a broader BULLISH TREND since Wave 1 is bullish (3150 to 14K).

4. In terms of inventory (position trades), the current prices are WHOLESALE. This is where retail traders are shaken out of their coins while institutions quietly absorb the available supply. We will be looking to accumulate, particularly during any extreme bearish price spikes UNLESS price closes below the 5K support level.

And that is how we are adjusting from a range bound outlook to a short term bearish one. Long term we are still BULLISH and will continue to evaluate broader levels for position trade opportunities until the short term outlook changes. Timing markets is about LISTENING and ADJUSTING to new information that PRICE provides across MULTIPLE time horizons. Adjusting means altering expectations about herd behavior around particular levels in the near future. Without an organized and particular process that fits your scope of risk tolerance, you are more likely to REACT to the wrong information. And if the market rewards you for such a behavior, you will soon learn that your new found talent is very temporary.