After the recent speech by Jerome Powell of the US Federal Reserve on Libra, and Trump’s tweet about crypto-currencies, these past few days have been turbulent. Let’s come back for a moment to the charts.
Although I often prefer to start with swing perspective to get an idea of the big picture before zooming in, we’ll do the opposite today and start with the intraday, before unzooming the charts.
I told you in a previous analysis that we were in range and that I was looking for short sales on retracement levels as a result. So, I shorted the level of 76.4% of the range, on a reversal H2 signal. It didn’t work out, and I was stopped with a small loss.
I obviously repeated the operation on the last possible level, in my opinion, the fateful level of 85.4% retracements (that we don’t talk about much, like its opposite, 14.6%). I went to take my trade on small units of time (15mn), and the market dropped quite quickly, confirming my trade and cheerfully compensating for the loss I took.
I now wait for prices to reach the 23.6% level before managing my position.
Here, two options are viable: cash out with your gain, and reinvest it in the event of a pull-back or bearish breakout (I always think that phases of declines are waiting for us), or let the trade run at the risk of seeing the market recover and lose the gain…
Here in H2 we can see the 2 resistances (in blue) which correspond to Fibonacci levels (in yellow) and on which it was possible to look for sales. Sales that must be initiated on smaller time-frame (15mn or even 5mn) for more accuracy.
We are, therefore, again and again, in a period of indecision materialized by this range that we have been working on for more than a fortnight now.
The exit can be done in both directions. If the market breaks the resistance, the next Fibonacci retracements of the crash (76.4% = $16,000) will be our target. This is a possibility, although it is not the one I favour.
A bearish exit is more likely in my opinion (these are only statistics).
After a long bullish run, the market oscillates in range and this is a normal process.
Indeed, as you know, the market never moves from point A to point B in a straight line. It advances by pulse and correction. However, seeing a market that gives only upward impulses and corrects very little or not at all is not a sign of a healthy market. If BTC already makes us a bubble again, it would undoubtedly be the precursor of a new crash in which many retail traders will certainly get trapped (once again?).
Being bullish on a long-term perspective on crypto-currencies, I think that a correction would be very healthy, and would allow us to continue towards potential new phases of increases.
Having many graphical indications of fatigue from the upward trend of the last few weeks, I, therefore, favour a bearish exit from the range, and I base my strategy on short-term in order to look for longer-term swing objectives (h4 and daily).
If we look at the future Bitcoin contract that is listed on the CBOE, we see a significant gap (more than 6%) that has still not been closed between $8,515 and $8,985. Although it is not an obligation to close it immediately, I think it may be an interesting first target for a decline.
Before, eventually, targeting the big resistance around $7,450.
Generally, we observe 3 types of gaps in a trend phase: the breaking gap which frees itself from resistance as we see on this graph, the continuation gap and finally the excess gap, demonstrating the fatigue of the market to be pursued. Here, the structure is perfect and the last two gaps have been closed, but the rupture gap is still open on the future contract and I think it will be closed soon.
Thus, if the market were to break the range, a new range between the gap and the resistance a little lower, seems to be logical targets:
I still don’t know in which direction the exit of the range will go: if it breaks the top, I’ll be stopped at break-even, letting a nice profit slip away… but if it breaks the bottom of the range, I might well take reinforcements and I’ll take an even bigger gain. Once again, we are playing with the statistics and the advantage that we can hope for in the markets because we have no certainty about the future.
A final word on the speeches and tweets of political figures.
Although I am convinced of the importance of the fundamental in the long term (Warren Buffet made his fortune based on fundamental analyses), I think it is inappropriate to consider news from a short-term perspective.
We all agree that a tweet can move markets (we have had beautiful examples with Trump, with Musk…) but ask yourself the question logically: do prices go down because a politician, however powerful he may be, has expressed his negative impressions on the crypto market (and this is not a big new), or because the market has taken more than 300% in a straight line in recent weeks and is currently oscillates in a range, showing sellers exhaustion?