Updated

Short BTC to 12,800, Entry at 21,500

Within the last several weeks, I've published several ideas supporting a bearish view for . (See also for an ETF tracking BTC futures.) Those ideas will be linked below.

In my latest view, BTC is trading within a quiet parallel channel in a countertrend fashion, which is called a "bear flag" in technical analysis. Bear flags, like other technical patterns, never guarantee a bearish outcome. But they do support a higher probability price path.

Based on that price path, a hypothetical short position is being opened for educational purposes. The entry is not ideal as I was not by the computer when BTC approached the upper edge of the parallel range this evening.

In addition, even if this short fails due to hitting the stop, this failure may be due to a whipsaw, similar to those seen in equity indices recently (and bear markets commonly). But the trade setup may remain valid despite being stopped. If a whipsaw occurs, this will be recognized after price shows that an "upside breakout) was false, with price falling back below the breakout of the upper trendline. If the stop is hit due to a whipsaw, the trade might be re-entered a second time when the whipsaw (false breakout above the channel) is confirmed by a break back into the channel.

Follow along and enjoy the ride! Create your own long / short as well, and post in the comments. Cheers!

DISCLAIMER: This is a hypothetical short trade using TV's short-position calculator. I would not traders to lose money by relying *solely* on this idea rather than doing their own due diligence. Most seasoned traders would never rely on a stranger's TV view alone. Before entering any trade, please consider the instrument / security being traded, the type of trade, the time frame, and the inherent risks of shorting (which can present unlimited risk without hard stops in place), and the financial risks in light of one's personal financial situation. This trade is for educational and entertainment purposes only. No recommendation is made by this post or other technical analyses discussing my bearish view on BTC.

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Now that an equity cushion has been established, albeit a small one, the stop loss will be moved to breakeven at $21,500. So if price moves back to the entry point at 21.5K, the trade will be exited. Risk capital is now zero.

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Several key levels being approached (see blue arrows with labels). It will be interesting to see how price responds to each. I suspect the .382 R will break shortly. The .50 R and the .618 R may require more work before breaking -- or potentially a bounce. We will see.

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The Bollinger Bands (white 2-standard deviation bands on the dark chart below) continue to validate the bearish view short-term (next day or two). They continue to open and widen, and price is walking the lower bands on the hourly and two-hour charts. This pattern suggests further short-term weakness.
However, if the price begins pulling away from the lower band and momentum starts to weaken, this could be a sign of a short-term reversal (consolidation) before further downside.

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BTC continues to make new multi-day lows. Profit on the short position is at $1271. The stop is still at breakeven level around 21,500, so the trade should be now "risk free."

The only issue that concerns me short term is that a small divergence appears on intraday RSI. However, divergences do not carry weight until confirmed by price. Price trumps indicators, but divergences should be heeded as a caution, and disregarded if not confirmed. At this moment, price action is not confirming the divergence.
Moving averages continue to be stacked bearishly, with each key average below the longer EMAs. They are all sloping down, and price is below them all.

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Price broke through the .382 retracement of the recent bounce (blue arrow). Price is approaching the .50 retracement just under 20K (green arrow). Price may stall at this level, bounce and retest -- or reverse. Will be interesting to see how price behaves here.

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Price is chopping around this .50 R level as anticipated. BTC broke below it for a while, now back above. Buyers and sellers battling it out here for a bit.

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Would You BUY BTC with a Chart Like This?

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Profit on the short is now $2,117.50. The risk is still zero (theoretically b/c a gap is always possible) given that we moved the stop to breakeven at 21.5K.
When the trade was entered (before an equity cushion was established), the trade risked about $2K to make $9K profit, leading to a risk/reward of about 1/4.5 (or a reward to risk ratio of 4.5).
In my view, it's good to trade only higher risk-reward setups because in reality, many trades do not go as planned. So if the risk reward is high enough, and the setup is good, then odds are better for a realized risk/reward that is still better than 1:1

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And BTC is at a make-or-break level here at the bottom of the bear-flag channel. It's trading right around this level.

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The way Fibonacci levels—especially the .618 R—locates key levels of support and resistance is fascinating. It's not a perfect tool, but its relevant more often than not.
In this update, see how BTC has paused its decline right at the .618 R of the entire corrective bounce? And this .618 R of the recent bounce also aligns well with the lower trendline of the bear-flag channel.

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