Long

Eerliy Similar Pattern to May 9 20% Dump

Updated

I had a much longer and more thorough description but deleted it. Doh! Note to self. Type in Evernote or word doc first! Note the simlarities in the pattern. Not looking to short, but to get long at a better price.

Note

OK so here is a little more detail on my idea...

I am not into trying to trade patterns or fractals. The only bitcoin patterns that I have confidence in are triangles and even those patterns are a 50/50 gamble. In terms of price levels, I am looking for a better Risk/Reward setup than what the market is currently offering. Higher timeframes are bullish. The illogical stock market rally, at least in the insane money printing US, looks like it wants more upside until the presidential election. That is good for more bitcoin upside, but does not mean go ahead and fomo in NOW. I have learned this the hard way, by loosing lots of money.

What I am seeing here is that the pattern that is forming now looks very similar to a previous low liquidity dump on Sunday May 9th that occurred after a pump during the highly liquid professional trading hours the previous week. The pump was dumped on a Sunday, then re-inflated once the normal professional trading sessions resumed. By May 11th it was as if the 20% dump never occurred. With these scary pump and dumps, bitcoin doesn't make holding a long position easy. To ride through these shakeout/liquidity hunts you need to lower your leverage.

Liquidity - In case you don't understand what "high and low liquidity" means, it simply means that there is less volume and large accounts trading so it is easier to move price around. Large accounts can temporarily move the market in a direction and magnitude that would otherwise be too expensive or impossible during the higher liquidity professional trading hours. The larger accounts can have lots of "fun" with your patience on the weekends. If you have ever seen a Darth Maul candle form on a 5 minute chart where it wicks up then down by the same amount only to return to the mean, well...there you go!

It is easier to hold a long when you get a descent entry. I don't like 10.8-11.2k as a long entry point. 9.5-10.2k seems like a better area to build a longer term long and I am prepared to watch this blast off without being in a position or position I have to closely monitor. This opinion can change based on price action. If we consolidate in the 11ks for several weeks this idea will be invalidated and I will start looking for entries in the 11ks. Not going to fight the market. It just doesn't seem like a good idea right now. Too soon in my opinion.

Back to the pattern discussion. If the pattern plays out like it did on May 9th and there is a 20% price dump, most likely on Sunday when the CME opens, I will be looking to start building a long Sunday night or Monday AM early. It is probably safer to look for that long on a Monday after 9:30AM EST to be certain the stock market isn't going to drag Bitcoin down. The downside to waiting that long is that you may not get a great entry. What I am looking for is a quick 10-20% dump then snap back into position by Tuesday. If there isn't a snap back by then, I would want to get out of the long and watch. There is also no guarantee that what we are looking at now isn't a fake out and that there won't be a dump straight though the previous consolidation channel, as in below the low 9ks. However, I think the upside is more likely for the next few weeks, minus a few very scary and par for the course dumps!

** Not financial advise. Just expressing my thoughts on the crpyto market"

Trade closed: target reached

The pattern played out, but only retraced 13-14%. I was looking for a 19-20% drop. I have a low leverage 10.5k short that I am looking to exit and that wick came within $10 of it. Ouch! Next opportunity to exit short and flip long is $10.9-10.8k, but testing 10.5k again anytime soon does not seem likely. Like myself, there are a lot of trapped shorts at that 10.5k level, so makes sense that the initial test would generate a strong bounce (in hidsight!). Price bounced $700 off 10.5k, so there was scalp potential there in addition to exiting the short. When I look left on the XBTUSD chart these fast dump wick targets, like 10.5k, usually don't get retested for several weeks if at all.

The lesson here is that levels take precedence over all else and the first retest of those levels are the best test. The other lesson is to use a static stop loss whenever prices is near a major breakout level! Duh! I also need to move my funds to Bybit or an exchange that doesn't lag during big moves. Deribit struggled during this dump at that did not help with quick decision making. I can't blame the exchange though. Had my bids been layered at higher levels I would be out of the bad short position and in a long term long position or atleast a nice scalp long.

Looking forward, with the CMEs opening tonight, Sunday August 2nd, the scenario I am leaning towards is a "miraculous" recovery in spot prices to the 11.5k before the open to put spot inline with CME future prices as if the weekend move never happened. The weekends are typically used be large accounts to get better spot positions, fake movements basically. The question now is, does 10.5k or get retested first. To hit 9.7k on CMEs and fill the gap would mean that the full 20% move down would play out. We'll see. Looks like low 11ks are holding.

Trading is not easy!

Longshortman

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