BTC - The Battle Between the Bulls and Bears
Updated
There is still much mixed sentiment among traders and a Battle that continues between the Bears and the Bulls. However, a critical support line in my opinion held yesterday which is the reason I added to my previous trade of $13,700. I'm fine with adding here as regardless of what the shorts may be throwing up on charts, bitcoin' is still in an overall uptrend in the long term. In addition, even though it has tested the $9000 and $10000 levels buyers came in quickly as is evident from the long wicks. Now this does not mean we can not go down, it is possible, but looking at the market it has been resilient to break the support structure, and when it has they buyers have rushed in. Again its context of the market and sentiment that are the determining factors in how I position myself period!
I want to separate a couple items that are often in my opinion misleading to new investors and traders.
#1 Indicators: Indicators no matter how many are thrown up on a chart are only as good as the person interpreting. If it was as simple as seeing a crossover of the MACD or EMA's everyone would be rich. These indicators provide in my opinion a gauge of market sentiment but since they all lag the market do not provide adequate information for swing and positional trades. Day traders and scalpers find these tools more useful as they are looking at smaller time frames, but in larger time frames these will often do more to misguide a positional trader or investor then provide any insight.
#2 Patterns: Patters are often misused in TA. Whenever looking at patterns or trends, you must keep in mind the time frame and more importantly how it relates to current market conditions and prevailing trends. Again, if trading and investing was as easy as seeing a H&S patter and going short we would all be rich! Often the context of the formation is misunderstood which leaves new traders/investors on the wrong side of a trade. The formation must be taken into context of the prevailing trend, and not just recognizing a pattern.
#3 Sentiment: Market sentiment is always the underlying factor in determining positioning. This is where indicators can be helpful when used properly. I want to be positioned to the longer-term market sentiment and use shorter term market sentiment to trade. For example, as hard as the bears have tried to push the strength of the market down, throughout this correction the daily 14bar RSI has not touched 30. Even though we have had a pullback of 30-40%+ the RSI is still showing us that the market is strong. At least in my opinion. Therefore, I had no issue adding yesterday and holding my previous trade. Elliot wave and Fibonacci levels are psychological levels often provide better insight to market sentiment when used properly.
#4 Price Action: MarcPMarkets is a guru when it comes to price action. You can trade on price action alone if you have a simple understanding of market conditions. You do not need MACD's HMA's EMA's Oscillators that are all lagging the market, when you can recognize price action. Now this takes time to master and is mainly for trading in shorter time frames but used in conjunction with market sentiment is a powerful tool.
In closing I see so many "TA"'s with harmonic patterns, butterflies, triangles, H&S etc, and not that these are wrong, but these are guesses and nothing more if not used in conjunction with Market Sentiment and Price Action.
We will be providing some more in-depth examples of how to use Market Sentiment and Price action so stay tuned!!!
I want to separate a couple items that are often in my opinion misleading to new investors and traders.
#1 Indicators: Indicators no matter how many are thrown up on a chart are only as good as the person interpreting. If it was as simple as seeing a crossover of the MACD or EMA's everyone would be rich. These indicators provide in my opinion a gauge of market sentiment but since they all lag the market do not provide adequate information for swing and positional trades. Day traders and scalpers find these tools more useful as they are looking at smaller time frames, but in larger time frames these will often do more to misguide a positional trader or investor then provide any insight.
#2 Patterns: Patters are often misused in TA. Whenever looking at patterns or trends, you must keep in mind the time frame and more importantly how it relates to current market conditions and prevailing trends. Again, if trading and investing was as easy as seeing a H&S patter and going short we would all be rich! Often the context of the formation is misunderstood which leaves new traders/investors on the wrong side of a trade. The formation must be taken into context of the prevailing trend, and not just recognizing a pattern.
#3 Sentiment: Market sentiment is always the underlying factor in determining positioning. This is where indicators can be helpful when used properly. I want to be positioned to the longer-term market sentiment and use shorter term market sentiment to trade. For example, as hard as the bears have tried to push the strength of the market down, throughout this correction the daily 14bar RSI has not touched 30. Even though we have had a pullback of 30-40%+ the RSI is still showing us that the market is strong. At least in my opinion. Therefore, I had no issue adding yesterday and holding my previous trade. Elliot wave and Fibonacci levels are psychological levels often provide better insight to market sentiment when used properly.
#4 Price Action: MarcPMarkets is a guru when it comes to price action. You can trade on price action alone if you have a simple understanding of market conditions. You do not need MACD's HMA's EMA's Oscillators that are all lagging the market, when you can recognize price action. Now this takes time to master and is mainly for trading in shorter time frames but used in conjunction with market sentiment is a powerful tool.
In closing I see so many "TA"'s with harmonic patterns, butterflies, triangles, H&S etc, and not that these are wrong, but these are guesses and nothing more if not used in conjunction with Market Sentiment and Price Action.
We will be providing some more in-depth examples of how to use Market Sentiment and Price action so stay tuned!!!
Note
megalo99 had a great comment on trends and asked the question why I entered when the trend is still down in the short term. Even though the short term trend is negative, the longer term trend on the left is still up. This is why I always take market sentiment and price action to position in accordance with the long term trend. However, if I look at the short term trend at first it appears to be negative from the downward slope. It is but lets look closer on the right chart. #1 the resistance trend line has not been broken. - Bearish even though we are testing it now. We have three now four points so we can call this a trend. This is the sole reason I have NOT added the second position of this trade yet. I want to break out of this resistance area with confirmation (one or two closing bars)
#2 The Fat blue line is the linear regression median trend line. Note that we are now trending above this line. bullish
#3 The Cyan line is the trend line I drew looking at support and resistance points. We tested the line recently and have started a shorter term uptrend (blue line). bullish
So though in the near term the trend line is still negative the trend itself is showing signs of change towards bullishness. As I am a longer term investor I am looking always towards the longer term trend for overall portfolio position, and the mid and shorter term for positional trades. Now add market sentiment which is slightly negative, yet we are starting to show bullishness, and the fact that most traders are late to the game, I am willing to take some risk here.
Again and I can not emphasize this enough. Trading corrections is risky period. So you must do your own homework. But this was a great comment and I do not want anyone to think I have lost sight of the trend.
Note
Is Bitcoin in a bubble like everyone speaks? Let's make a comparison to Amazon from the 2001 bubble and Bitcoin from the 2014 bubble. Seems like if Amazon is a buy here, then Bitcoin is definitely on sale!!! Both are disrupters but which one is the bigger disrupter? I think bitcoin is much more of a disrupter personally. Can we go lower? Sure. Do we have to before we move higher? Absolutely NOT!
Note
We often mention market sentiment is a good indicator of either an over exuberant market where we need to take some off the top, or an over sold market where we should look to add. A lot of comments on BTC futures closing tomorrow. There is a concern that a trader could start aggressively buy or sell before the close to try and "manipulate" the market; However, in the era of bot and arbitrage traders would come in quickly to smooth things out. I could be wrong but I would rather position myself to the opposite side of the crowd who thinks we will go down because of the futures market, and nothing happen creating a rally after, then position myself into a crowded trade of "shorts". I really do not see the futures market having an effect but we will see. Keep in mind the large brokers want to introduce more products like options and ETN's so they have a reason to insure there things run smooth.Note
We have broken the down trend and I would like to see a close above the trend line that would now provide a resistance level. In addition we appear to be consolidating which in a market where you can not readily short, I believe this leads to a breakout to the upside. I will make a trade if we show a strong movement through the consolidation box. The market as a whole is finding balance and bears are growing tired. We can always move down, but who is selling here? Those that bought in Dec are either long gone or are holding at this point and most likely adding. With the stock market over heated, investors are looking for any alpha they can get. What market is providing more alpha then cryptos? 
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