BTC → Bitcoin Blasts Through Resistance Then Falls Down. Short?
Updated
Bitcoin completed its measured move on January 7th and gave us some extra price action up to the $49,000 area. With a strong sell signal and now a follow-through bar reaching the Daily 30EMA, is it time to short?
How do we trade this? 🤔
To justify a short trade, we need a Daily candle close below the 30EMA. The other data points all support a counter-trend trade: Measured Move Complete, Strong sell signal above key resistance area, RSI below the moving average around 50.00 with room to fall.
I frequently reference the 4HR chart when trading the Daily timeframe. As you can see in the chart below, the 200EMA on the 4HR chart overlaps with the 30EMA on the Daily chart. Using that same point of reference as a key support level, we can look for a close below the 4HR 200EMA to justify our short. That also allows us to get an earlier entry into the position:
Once we get that candle, we can justify a short scalp to the previous trading range/measured move mid-support at a 1:1 Risk/Reward Ratio.
💡 Trade Idea 💡
Short Entry: $42,650
🟥 Stop Loss: $46,950
✅ Take Profit: $38,350
⚖️ Risk/Reward Ratio: 1:1
🔑 Key Takeaways 🔑
1. Measured Move Completed Into Key Resistance Area.
2. Strong Sell Signal Above Measured Move Resistance.
3. Strong Sell bar falling to 30EMA
4. Wait for Daily Candle to Close below 30EMA.
5. RSI at 50.00 and below Moving Average.
💰 Trading Tip 💰
There is over a 60% chance of a measured move after the breakout of major resistance, normally, a trading range. That means the distance from the trading range resistance to the top of the breakout will happen again above the top of the breakout.
⚠️ Risk Warning! ⚠️
Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
Like 👍 and comment if you found this analysis useful!
How do we trade this? 🤔
To justify a short trade, we need a Daily candle close below the 30EMA. The other data points all support a counter-trend trade: Measured Move Complete, Strong sell signal above key resistance area, RSI below the moving average around 50.00 with room to fall.
I frequently reference the 4HR chart when trading the Daily timeframe. As you can see in the chart below, the 200EMA on the 4HR chart overlaps with the 30EMA on the Daily chart. Using that same point of reference as a key support level, we can look for a close below the 4HR 200EMA to justify our short. That also allows us to get an earlier entry into the position:
Once we get that candle, we can justify a short scalp to the previous trading range/measured move mid-support at a 1:1 Risk/Reward Ratio.
💡 Trade Idea 💡
Short Entry: $42,650
🟥 Stop Loss: $46,950
✅ Take Profit: $38,350
⚖️ Risk/Reward Ratio: 1:1
🔑 Key Takeaways 🔑
1. Measured Move Completed Into Key Resistance Area.
2. Strong Sell Signal Above Measured Move Resistance.
3. Strong Sell bar falling to 30EMA
4. Wait for Daily Candle to Close below 30EMA.
5. RSI at 50.00 and below Moving Average.
💰 Trading Tip 💰
There is over a 60% chance of a measured move after the breakout of major resistance, normally, a trading range. That means the distance from the trading range resistance to the top of the breakout will happen again above the top of the breakout.
⚠️ Risk Warning! ⚠️
Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
Like 👍 and comment if you found this analysis useful!
Note
We have our break of the Daily 30EMA support! Zooming into the 4HR chart shown above, we need the current candle to hold and close below the 200EMA. Once that candle closes, we have justification to short.
Now there is another data point to consider, the 4H RSI is at 25.00 which does not support this moment being optimal to enter a short trade. For the sake of getting a better entry, I would wait for the price to come back up to the 200EMA and attempt to break it for awhile. This allows the RSI to come up and above the 30.00 to 35.00 area, giving it more room to fall. Once we see some resistance and bars closing below the 200EMA, we'll have a better short entry and more justification.
I wouldn't say entering at the close if this candle below the 200EMA isn't justified, but I will say Bitcoin is still in a macro bull trend, so we can't get overexcited at the first sight of a bear candle because that's how bears get trapped and how bull trends continue (bear shorts get stopped out and the bulls keep buying). So wait for the chart to tell us Bitcoin is out of gas at the 200EMA, then short scalp.
Trade active
Trade entered at $42,750, Take Profit at $38,450, Stop Loss at $46,950 at a 1:1 Risk/Reward Ratio.
We have the RSI coming back up to meet the Moving Average, the price action has been weak for the bulls, a short trading range, classic continuation pattern. It is possible we get one more spike up to the 4HR 30EMA, but the stop loss placed above the Measured Move Target of $45,800 is reasonable because we're counter-trend trading this pattern and postulating that we will not have a test of the wicks at the top.
The trade ought to remain open until the take profit is hit or if we see a strong bull reversal on the 1HR or 4HR chart.
Trade active
Bitcoin gave us our first move down from the 4HR 200EMA, riding just below the 1HR 30EMA and falling to the wick price area of $41,700. As expected, the price has come back up as skittish bears are taking profits and hopeful bulls are putting in long entries. Ultimately, the bulls are not likely to muster the strength to give us a higher high and that will send more of them into selling, driving the price further down.
Based on my Bitcoin Lifetime Analysis, I believe Bitcoin will retrace and give us at least a Weekly candle wick to the $25,000 area:
The short in this analysis is strictly short-term. The macro-trend is clearly bullish and we should be looking for long entries once we get near the $30,000-$32,000 price area.
Trade closed manually
Closing this trade manually as Bitcoin has failed to break toward the downside. The longer the sideways price action pans out, the greater chance of a reversal. I believe a large Bitcoin pullback is coming, lets wait for the next entry!
You can see my last current live trade happening now at USD/CAD where take profit #1 was just hit:
I just closed my USD/JPY trade where my second take profit was hit. First take profit was 120 pips and the second, 245 pips:
-Joe Dean
Trader Engineering Course
**Available Now at TraderEngineering.com**
Trader Engineering Course
**Available Now at TraderEngineering.com**
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.