Mapping New Landscapes in Bitcoin (Part 3)
Updated
The structure of new landscapes is always unknown at first. But if you've ever been hiking, you know there are characteristics that never change. Maybe there's a path in the woods, a consistent slope, or the sound of water. You might look behind and think, "I know so much about where I was, but how do I move forward without the same knowledge of this new terrain?"
We know so much about Bitcoin's landscape below the H&S neckline. Maybe someday you'll remember it as simpler times. But it's a fallacy. There are never simpler times, only familiar ones. For a long time under the neckline we knew nothing, but that didn't stop us from trading. Just because a landscape is new and unfamiliar doesn't mean we shouldn't move forward. Just update your map and don't fall off a cliff, this is all we can expect from ourselves as traders.
In this series of posts, I’ll be explaining our updated map of Bitcoin’s new landscape, layer by layer.
[I]Part 3 - Integrating New Information: Walking the Trails[/I]
Today I thought we should use our map to fine tune the details and form some expectations as we walk Bitcoin’s landscape. Yesterday, there was an attempt to extend the breakout, but it was powerfully rejected. This affords us an opportunity to update our map, further stabilize its details, and make it even more reliable.
The top of the failed extension didn’t really match our minor Fibonacci extensions, it was half-way between the minor -27.2% and -41.4%. But after moving the bottom of the breakout to the 23.6% retrace, the minor extensions explain better the top of the rejection, which was the minor -27.2%. This has the additional benefit of placing the minor -41.4% exactly at our strong resistance, giving it a natural basis for its location instead of just being a historical price.
I also moved our resistance at the $7,380 38.2% retrace to the major -61.8% extension at $7,480. With another day of information, it’s clear that this is the price we haven’t managed to close above. The current candles confirm it, it has a natural basis, and, now that we look at our sister pullback, it has a historic basis. The sister pullback only found it as a support when it had a daily close above it, so we should expect the same again. While support and resistances are not really single prices, and instead areas of prices, having a single price provides validation to confirm when a support or resistance is broken. The additional benefit of moving this resistance gives us a better understanding of what to expect from our black retraces in the future. They will either act as the edge of a support or resistance to confirm a breakout, as was the case with the 23.6%, or act as very broad and dynamic support and resistances for daily candles to float around.
Now that we’ve seen more of Bitcoin’s landscape and walked its trails, we can begin to form more detailed expectations and make our first forecast. The breakout’s extension to the minor -27.2% was rejected with very high volume. This is a serious wake up call for anyone expecting $8,000 anytime soon, but it doesn't mean we will go straight down from here. Instead, we will likely retest this high and spend more time there, but just long enough for the bulls to take partial profits or exit their profits entirely. I will be watching for a TP or EXIT signal from PRO Sinewave on the 2H chart, and then await a drop down to a support. We certainly have early warning signals, as we are now overbought on momentum on the daily, as indicated by the red dot. And with sinewave also bearish on the daily, as indicated by the line of red dots at our strong resistance, we are now double bearish. A pullback could be quite deep, possibly to $7,080 or even $6,820. But instead of seeing this as a crisis, as many of the herd and TA echo chamber might, we should instead see it as an opportunity to increase our bullish position. Until then, see you on the trails!
[I]Part 4 - Volume Profiles: Expecting Uneven Terrain[/I]
We know so much about Bitcoin's landscape below the H&S neckline. Maybe someday you'll remember it as simpler times. But it's a fallacy. There are never simpler times, only familiar ones. For a long time under the neckline we knew nothing, but that didn't stop us from trading. Just because a landscape is new and unfamiliar doesn't mean we shouldn't move forward. Just update your map and don't fall off a cliff, this is all we can expect from ourselves as traders.
In this series of posts, I’ll be explaining our updated map of Bitcoin’s new landscape, layer by layer.
[I]Part 3 - Integrating New Information: Walking the Trails[/I]
Today I thought we should use our map to fine tune the details and form some expectations as we walk Bitcoin’s landscape. Yesterday, there was an attempt to extend the breakout, but it was powerfully rejected. This affords us an opportunity to update our map, further stabilize its details, and make it even more reliable.
The top of the failed extension didn’t really match our minor Fibonacci extensions, it was half-way between the minor -27.2% and -41.4%. But after moving the bottom of the breakout to the 23.6% retrace, the minor extensions explain better the top of the rejection, which was the minor -27.2%. This has the additional benefit of placing the minor -41.4% exactly at our strong resistance, giving it a natural basis for its location instead of just being a historical price.
I also moved our resistance at the $7,380 38.2% retrace to the major -61.8% extension at $7,480. With another day of information, it’s clear that this is the price we haven’t managed to close above. The current candles confirm it, it has a natural basis, and, now that we look at our sister pullback, it has a historic basis. The sister pullback only found it as a support when it had a daily close above it, so we should expect the same again. While support and resistances are not really single prices, and instead areas of prices, having a single price provides validation to confirm when a support or resistance is broken. The additional benefit of moving this resistance gives us a better understanding of what to expect from our black retraces in the future. They will either act as the edge of a support or resistance to confirm a breakout, as was the case with the 23.6%, or act as very broad and dynamic support and resistances for daily candles to float around.
Now that we’ve seen more of Bitcoin’s landscape and walked its trails, we can begin to form more detailed expectations and make our first forecast. The breakout’s extension to the minor -27.2% was rejected with very high volume. This is a serious wake up call for anyone expecting $8,000 anytime soon, but it doesn't mean we will go straight down from here. Instead, we will likely retest this high and spend more time there, but just long enough for the bulls to take partial profits or exit their profits entirely. I will be watching for a TP or EXIT signal from PRO Sinewave on the 2H chart, and then await a drop down to a support. We certainly have early warning signals, as we are now overbought on momentum on the daily, as indicated by the red dot. And with sinewave also bearish on the daily, as indicated by the line of red dots at our strong resistance, we are now double bearish. A pullback could be quite deep, possibly to $7,080 or even $6,820. But instead of seeing this as a crisis, as many of the herd and TA echo chamber might, we should instead see it as an opportunity to increase our bullish position. Until then, see you on the trails!
[I]Part 4 - Volume Profiles: Expecting Uneven Terrain[/I]
Comment
Nothing new so far today, just waiting for the retest of our recent high. I've updated my wave projections to correspond better with our timing and with The Cliff. I know I haven't talked about the waves or the cliff yet, but if you draw a trend line from Bitcoin's top in March to its top in May, you can add this possible inflection point to your charts. We seem to be getting closer to it, so the wave analysis now shows some potential points of failure. This line is the only thing on my chart that could stop our rally from reaching $10,000.
Comment
This one is a little more clear.
Comment
Half of our forecast has now been confirmed. We have a retest of the high, finding support and spending more time up there, and even successfully reaching our strong resistance. The next half is for us to pull back lower.
Now that we have a decisive daily close above $7,480, we can safely mark it as a support. This is in addition to another source of support I discovered, the 100 Day Moving Average. Bitcoin struggled to reach our strong resistance because the 100 DMA was sitting half way between our two resistances, explaining why this extension of our breakout has taken so long. This moving average could have a similar effect now that it can act as a support, increasing the bullish potential of our rally. And with $7,480 now a support, that's a potential limiting factor of a deep pullback.
But I believe that our strong resistance could over power these supports, especially if we reach our maximum possible extension at the major -61.8% at $7,920, where the 50% retrace sits, and some much more concentrated pockets of volume, as indicated by the deeper red bands. I've again updated my wave projections to account for our new timing, new supports, and the Cliff. We have many potential points of failure if we do not successfully climb above the Cliff. I think we'll get close to it from our new high in the next couple of days, and then initiate the pullback. If you're using PRO Indicators, a 2H bearish TP or EXIT signal (I'm expecting an EXIT) should be a safe sell now.
Comment
I've been hearing a louder cry in the word on the street about $8,000 and even $9,000, even by some respectable pro traders. These prices have some merit, just not timely merit, and they don't match our technicals or expectations.Whenever we get closer to a forecasted top or bottom, even the most experienced pros begin to question their reality. But those of us with a validated and forecasted plan of this know that it's business as usual. It just happens to be our most bullish forecasted outcome. We did our homework for each scenario so we could never be surprised, and nothing has changed!
But it's totally okay to think about why we might be wrong. What if things will become even more bullish? What if we do reach $8,000 or $9,000, without a pullback? If we think about why that could happen, we'll be less likely to surprised or upset by the effects. If a trader is surprised, it's because they were too biased. Bias is good, but too much of it puts your money at risk by not thinking how your money is at risk!
The merits of $8,000 or $9,000 I refer to relate to what I think is a flight of capital away from the alt coin market to the Bitcoin market. With each rally of Bitcoin, there's a deeper sell off by the alts. It's still too soon to know if the alt coins will continue their sell off, but they are currently sitting on their precipice, possibly to drop even lower. This transfer to Bitcoin could explain its further bullish potential.
Now that we expect this as a possibly, we're much less likely to be surprised. What a comforting thing it is, thinking without bias. However, we trade technicals, not curveballs. And we have no technical basis to trade for anything above $7,920 right now. So we follow our map, as much as other hikers' directions might lead us astray. But so we won't be surprised, let's set an invalidation point for our map: a decisive move above the Cliff to $8,100. If we get there, I'm willing to start drawing an entirely new map. But so far, I see no evidence that anything has changed.
Comment
So our forecast has been invalidated as we are moving further and faster than anticipated. There are many reasons for this, flight of capital from the alt coin market, accumulation by much larger and bolder accounts, emotional trading, or a combination of all three. As interesting as the first two reasons are, we can't really base trades on them. However, we can base trades on emotion.
This is still a crashing market because we have yet to make a higher high, only lower lows. Above $10,000 would be a higher high and terminate the crash. Viewing emotions through the lens of this crash, we can determine that the bulls emotion right now is confidence. They have already surpassed the Cliff, broken through our most concentrated band of volume, and are now sitting at the 61.8% retrace. Confidence usually finds sellers, so a pullback here should be expected. The next stage of their emotions is over-confidence, and this will likely occur if they break above the 200 Day Moving Average, currently sitting at $8,670. This happens to also be a major technical hurdle, as our previous top at $10,000 failed to reach above it. If breaking the 200 DMA isn't euphoric enough to find bears, than reaching $10,000 again certainly would be. However, if we don't see a significant pullback at confidence or over-confidence, then this could be an early signal that the crash is over.
The level to watch for in the coming days is $8,600. Hopefully I'll find time to update my volume bands around there, as I currently don't have any. Didn't expect to get here so fast.
Comment
Pulling back to some good prices for those looking for an entry. We might reach the 23.6% retrace of our breakout from the H&S neckline. Remember that a pullback is very healthy, it will make this rally much more sustainable, and less emotional. It might even be good news for the alts, as now the retail traders can get into the market.
Comment
23.6% retrace reached. This could be the bottom of our pullback. The ideal entry is at $7,780, but we should never expect the ideal.Comment
Just noticed this is a news based dump. Probably best to stay away.Comment
mikej_88, Sorry I haven't been doing any new analyses. But here is a scenario on my chart that I'm currently basing everything on, a long term wedge. If we bounce from our current position, this wedge is likely to be our new reality for the next month. Obviously, no one can say for sure that we will bounce from here, but I am expecting a bullish week next week. So many consecutive down days isn't really sustainable. Still waiting for a bullish daily pin bar, long lower shadow daily candle, or double bottom to confirm an up movement. Then likely capped out at the descending trend line. Just my current scenario, will take a few days to validate, so no rush in enter a long position.
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