25/09/2018/08:00CET
Drifting lower again. For all those premature bulls out there, it must really seem like god is mocking you.
#BTC slides again with those sickening red candles back to its support floor at 6k.
This time only having made it to 6840 usd.
So at press time, we are trading at 6469usd after having peaked out at 6840 usd 4 days ago.
This failed rally marks a continuing trend of lower highs.
But on the upside, we are also seeing higher lows.
Let's take a look at this with a rational mind and wipe the emotion out of our eyes for a moment.
In the daily chart we see a pretty predictable behaviour now in BTC. We have seen it over and over again.
It is a well recognisable pattern visually represented by a wedge with steadily higher lows, but also lower highs. I know it sounds like an insiders word game with lows and highs, like some weird oxymoron, but if you analyse the words they make sense.
Coiling energies
This pattern is a coiling pattern of trading energy as more and more people exit active trading in the market and wait for a decisive move to signal a direction and thus to trigger their reentry.
The coil will tighten further and further till there is a break. A momentum move.
In some wedge pattern, this is more clear to see than in others, what direction this move will take, but one can never be sure.
All you can be sure of is as the coil tightens more and more, there is more energy being stored up with capital waiting to see a direction in the market. At these times, whales or news events can have dramatically overweight reactions.
With more coiling, the lower the event threshold becomes. Just like a pebble can start an avalanche.
I want to show you a zoomed out view of BTC to get a better idea of the coil.
As far as coiling wedges goes, this is a doozy! There is so much energy pent up here.
This wedge (and it can be drawn from a variety of points but will look pretty much the same) has been forming since the Feb lows in #bitcoin.
Notice how price action has crossed 3 moving averages in the last 4 days. The 100, 50 and 21. Another sign of the coiled energy, how price action has dragged these indicators close together like that!
The 200 is still quite a ways above us though at the 7400 usd mark.
Where to from here
I feel that talking about support resistance and moving averages is redundant when I see this wedge.
To a certain degree they are distant secondary considerations.
We are in a seesawing mode between a breakout and and breakdown. There is more and more energy backing up, so when we get a break, it will be with some power. Only major lines of support or resistance will offer any pause. There maybe significant overshoots as well, as volatility will come rushing back in. Expect a significant change in the volume characteristics of the market.
I expect volatility will continue to drop and we will continue to have an uncertain movement in this wedge for a few weeks to come. The waves between our highs and lows is beginning to not be worth swing trading. (If you were to ride this last up wave, it only earned you 7-8% gain). This may have the effect of taking more day traders out of the market as they also seek a direction. More energy into the coil.
How many bounces are left before the market makes up its mind and moves? I don't know, but not many.
A breakdown is easier to spot now. If BTC drops below 5800usd, we are going into a world of pain.
As I have often said in my blog here, trade with stop losses. Any trader worth his salt is.
With more stop loss orders loitering out of site of the order books, this has the added effect that as they get triggered, we have a cascade effect with gaining momentum to the downside. We are going to fall off a cliff!
I think break below 5800 usd will be a cliff till around 4800-5000usd. A fat slab of buyers will step in at these levels I believe. It may end up being a dead cat bounce but there will be a significant bounce.
On the upside, I think any new rallies will pause at the upper wedge boundary, which sits at just under 7000usd today and in 1 week will be at 6750 usd. I think we can only call it a breakout when we rally past this descending resistance line decisively for a few days.
The fear that will exist is if the rally is strong then by the time a few days goes past, we will already be +20% into the upswing and then the fear of buying before the first pullback will gnaw at the novice trader.
Trade smart and layer in the buy trades as the breakout start to show, and keep adjusting stop losses below you as a safety net. Volatility will be high so a tight stop loss may get stopped out even in the upswing.
When TA does not offer much in the way of feedback from the market, a glance at the fundamentals and news helps.
Here too we have a lot of uncertainty.
Slow burn events in the background are mainly positive. The tech is progressing, all adoption metrics are showing growth. Geopolitical tensions and trade wars are pushing vulnerable currencies into dangerous imbalances all of which make "volatile" cryptocurrencies look positively stable!
ETF discussions are stalled and inconclusive. Do the authorities realise what they are doing?
With more time in this uncertain period, the more overheated the reaction to there final verdict will be? In particular to the upside.
It could be that the authorities realise that they almost have to approve an ETF. Because if they don't, then crytpos will continue to grow, but out of their hands.
Remember: It was an ETF that finally tamed the gold market after all. The proverbial tail wagging the dog.
On that subject, be wary of any derivative instrument (like an ETF of ETN or futures, etc..) that do not have to settle in the native underlying asset.
I will leave you there before I get too carried away with my ramblings...
As always guys, leave comments, have fun and trade safe.