Long

BTC to close CME gap to $9665? - then long for $14k

Updated

I think we have to admit that there is a very high probability of BTC closing the CME gap that exists down to $9665. Every prior gap on BTC CME Futures since it launched 2.5 years ago has been filled, and this is the only one remaining. Yes there will be strong support in the $10,500 region, but I would really like to see a wick all the way down to $9665 to close the gap. From there we can go long with confidence to attack and beyond. I am guessing there will be lots of limit buy orders at $9700 region, as many will have their eye on this, so I expect a hard bounce. We only need the futures market to close the gap, BTC itself on the exchanges might not make it all the way to $9665 so I would suggest a spread of DCA limit buy orders in a region from $10,500 through $9670.

It is notable that in the next few days we have the confluence in the $9500 - $9600 price region also of:
1) The 1D EMA 200, which should add support
2) The descending line of resistance for last 2.5 years, which was breached a few weeks ago, which can now be tested as support. This would be a typical behaviour but less important to me than the above two factors.

My expectation/hope is that this will happen quickly, within the next week or 10 days.

Exciting times, lets see what happens!

Note

Realigned the descending channel to the formation. It could be an ABC correction, but is it really possible that we drop this quickly to close the gap in the timeframe this suggests?

Perhaps - and certainly if the S&P500 bubble bursts this week, BTC will follow, at least during the initial market shock.

There is still also a scenario where this is a flat correction and the gap is not closed in this cycle. This is not preferable as it leaves open the possibility of returning from higher levels back down to close the gap.

Note

Watching CME Futures on the 1H - at the lower support of broadening ascending wedge. It looks like it may have broken below the RSI resistance and a break below the ascending support could be incoming.. anyone interested in a short could do so on the break. In that case filling the gap is a very realistic target. Whilst this is technically a decent R:R trade, going against the overall bull trend and sentiment now established is still a risky thing to do.

Note

There's a risk of confirmation bias in my analysis now, but even so, CME observations on the 1-day I think are notable:

1) Strong RSI divergence across the ascending broadening wedge structure (red lines)

2) Ascending wedge on the RSI (green lines). Currently we are at the support and any break below the price support will also break below the RSI support. After the break, I'd probably look for the RSI to either bottom in a position which creates a parallel channel with the RSI resistance, or to double bottom alongside the prior low point of 18.

Note

I realigned the descending channels to the structure which is forming and adjusted the trade window likely timing based on this.

Some support was found at the 4H EMA200. We just got a bull break fakeout, possibly a short squeeze, which pushed the price back up to the 1H EMA200 where it found resistance. I think we are going back down to test the 4H EMA200 support again. If we break this and go below $11100 then this trade is on. Thanks to Solldy who showed me where another line of rising support has existed since the lows of Jan 2019. The breach of this support by the COVID crash disguises it, but it is definitely there in the BTCUSD chart and the CME futures chart. It's almost exactly in line with the 1D EMA200 which is great news. Reminder, if we drop from here we have 5 confluent reasons to expect big support in the $9700 area:

1) Closing of the CME bull gap
2) Descending resistance line from early 2018 highs, which can now be tested as resistance
3) 1D EMA200
4) Rising support line since early 2019 lows
5) 0.786 retrace from 27th June low to 17th Aug high

All 5 of these will sit within a $400 range ($9350 to $9750) between now and mid September. I know people have said so many times "last chance to buy under 10k" so many times and been wrong, but I really believe if we go under 10k now, that saying will finally be true. I will buy this one from just above $10,500 down through $9500 if it gets that far.

Note

We got a strong bear impulse today, indicating that the B wave was complete and we are now on C of the ABC correction. We still need to drop below $11,100 to confirm but this now looks highly likely.

Reset the pitchfork with the new information, it certainly could be mid September before the correction is complete, but this trade is still setting up nicely. Timing is always the most difficult thing to judge (which is why I try to use the pitchforks to provide an idea of trajectory over time).

Note

We've broken below the 4H EMA200, approaching our buy zone and closing the gap now looks very feasible. Looking at the 1D BTC futures chart, it is interesting how the 1D EMA200, our next major EMA support, is currently just below the gap and will rise to the bottom of the gap by mid Sept.

I have price orders laddered over a range down to the bottom of the gap. However you could also look for entry based on BTC Futures 1D RSI targets, or at least use this to understand when we may have bottomed if you prefer entering on the way back up rather than the way down. We broke the rising RSI support and now we have two targets: parallel channel in the region of 26 - 30 and "double bottom" at 18.5. To double bottom the RSI from here would require, I believe, a much bigger crash well below the GAP and 1D EMA200, which I think is unlikely with the current bullish market sentiment (unless we have a repeat of the market-wide sell off in March). So, keep an eye out for a reversal in the 26-30 range, then a break of the (red) descending resistance line on the RSI.

Timing still looks like mid to late september, although timing is always the most difficult thing to judge.

Trade active

This trade is on and we're now in the buy zone, on our way to close the CME gap. We're not done yet - the CME gap hasn't been touched yet and for a "C" wave of an ABC correction we should expect 5 subwaves. Candidates for waves 1,2,3 are in, I think we might now be on wave 4 and see some sideways recovery for a number of days after the big drop yesterday. Recovering to around $10,900 makes sense, although we don't invalidate the ABC count unless we go above $11,100.

So, we're looking for one more lower low to complete a reversal. Target must be $9670 at least on the CME Futures chart. I'd be hoping for a very strong bull impulse off of the low which could blast us to in October.

Some of my DCA buy orders already executed and I'm happy with that from a risk management perspective, despite expecting the lower low.

Note

Interestingly we put in a lower low shortly after, but I don't think this is the low we are looking for, the upper range of the CME gap was touched but not filled. I think I just have to adjust the position of the subwave 3 accordingly.

The drop was correllated with a sizeable dip in the stock market - particularly in tech stocks. We have to acknowledge that if the stock market dives hard it will pull BTC to lower levels. I've therefore sold some of the DCA buy orders which filled, on the bounce for around a 5% profit, to provide more dry powder for buying lower if needed.

As noted above we do have many different supports just below us and we must hope for a bull reaction when CME gap fills.

Note

CME Futures reopen at 2200 UTC today, so be on the lookout for any sudden drop closing that gap. The count below is what I'm going with, assuming there will be one more drop to close the gap. I think that the most likely scenario is a drop in conjunction with another drop in the US stock market tech sector - and due to Labor Day this likely won't be until markets are open again on Tuesday.

Of course, there is a possibility that we go deeper than the 1D EMA200 and $9670 support (now at the same level). We have the long term descending resistance, now hopefully turned support, currently around $9300, and more support in the $9200 - $8900 range. I will continue to buy down in that case. Below that, we probably look to $7700 - given all the reasons mentioned above I think the probability of this is very small (less than 5%) - but given the correllation with the stock market we can't rule it out (as we saw in March).

Note

I believe that Tech is going to dump when the US stock market opens in 1.5hrs, led by Tesla down sharply on S&P500 exclusion. BTC will be dragged down with the market, so look out for gap closing today.

Note

Trying to update trajectory and count on shorter timeframes, with some fib levels, to see where we could hit the bottom of this ABC correction. It looks like $9300 to $9600 region to me. Likely tomorrow or Thursday if not today. Very interesting week.

Note

Another perspective, 15 min chart CME BTC Futures.

I am strongly convinced that this is happening. CLOSE THE GAP PLEASE!

Note

Waiting game.. that triangle can now be interpreted as an descending wedge and we have bullish divergence on the 1H. I really want to see the gap closed before it goes up, perhaps as shown below. Otherwise we will end up back at 11100 or 11200 level and will need to make another attempt later. The sooner we get this gap filled the better.

Note

Now possibly a descending parallel channel.. patience is required..

Note

My EW count is still valid unless we break $11,155, but there are at least 3 different possible counts - for example where I have subwave 3 and 4, could be the larger scale A and B - in this case we could go deeper than my buy zone. It's also possible to complete the count for C where I have 3 marked, and in that case we would be going up again. We just don't know until we get more price information in the next days.

Currently we are trying to hang on above 4H EMA200 for support, and are holding between that and $11,100 resistance. We could do with a solid break in either direction to show us the way.

Note

My subwave 4 overlapped with subwave 2, only by $20, so it's debatable as to whether this invalidates the count, but here's an alternate count. More likely we go deeper with this count, so I adjusted buy zone down to $9,200. There are other counts which could take us deeper still.

ES1! is printing some nasty red candles this morning so I suspect this will be a tough week on the stock market and BTC will get dragged down with the market. This could play out quickly or take until early October to close that gap. My hope is that it plays out quickly this week and then we get a decoupling of the BTC - stock market correllation that means BTC can go high while the stock market continues to correct down.

In my mind I am ready for at least $9200 bottom but could deal with $8,800 or even $7,700 for this trade plan if needed.

Note

Oct 1st and we still haven't closed that gap. BTC1! could be interpreted as an ascending triangle reversal, but things are never that simple with chart patterns. We are closing on that $11,100 resistance and something will give one way of the other. We still have a week or two where we can close it without needing to lose 1D EMA200 support. So, I'd really like to see it happen soon rather than go straight up from here.

If we do go straight up from here, well, that is why we DCA buy over a "buy zone" rather than at a single price. We covered 50% of the zone so will still make good money from this setup.

Trade closed: target reached

spruce_g00se

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