Short on Matic; long on Solana
Updated
Introduction
I am biased short for the Ethereum ecosystem as a whole due to all the efforts made to have the system run more efficiently and at a lower cost. Price action will work its way down initially and severely before eth benefits again from the "adoption" trade.
A similar concept is water purification. Imagine water is very expensive to obtain and make potable. Efforts are made to get potable water cheaper and a new system is created that produces drinkable water at 1/10th of the price. The old systems that were in place before the development are going to crash in value as people move to the new system. The price of water is cheap and more people use it than ever before.
Matic is one of the old systems through no fault of its own or its developers. The price of Matic is due for quite a drop and the new Ethereum systems are poised to benefit if they can survive. And then there is the alternative to drinking water. I guess for this example we are talking about having a nice Mexican beer (a very overused pun for SOL). Hell, Cinco De Mayo is around the corner as well
Main Chart
This is technically a very simple play. Which is why I hope it is so powerful. We have a simple chart formation, a rising wedge creating a bull trap. That bull trap is a macro lower high from the all time high. We have a EMA ribbon that was support, and now it is poised to act as resistance. The targeting is likewise very simple. We can set a roughly equal W bottom which would be over a 60% loss from current levels.
Other Charts
I have cobbled together a set of indicators to develop a system to benefit from impulse as much as possible. It is decent on multiple time frames but I an trying to make less trades but bigger moves and tighter stops.
This set up is about 85% complete for a entry. It is a Heiken Ashi momentum strategy that looks to go short when indicators have a "bearish stack" and long when they have a "bullish stack. Ideally I would have waited until the SMAs were bearishly stacked and shorted rallys but shorting a break of the wedge is good enough.
Maticbtc versus LunaBTC
To be blunt, the MATICBTC chart looks like hell. There is a macro double top in blue and a nested double top making up the right top. These two formations cascade to a full target of Matic loosing 80% of its value against bitcoin from here. Absolutely devastating.
One thing scratching in the back of my head is how LunaBTC had a chart that predicted a simuar drawdown but the whole project got obliterated. One target for a rising wedge is the bottom of the wedge. So LunaBTC should have "only" dropped some 80% as well. I am wondering if some similar catastrophe could bit Matic. If not, and it merely loses 80% in a orderly fashion then I will be around to long the W pattern if it is confirmed.
My Trade
I have a pretty good entry. I was very tempted to take an entry in at a break of the purple trendline but the chance that price could have recovered at the wedge for another pump was too high and not enough of my conditions to go short were met. I am closing my trade at the first target and waiting to see if a continuation or reversal pattern develop. It could be a multi-month process.
I have a chart I use for reversals that uses daily and weekly SAR as well as the ADX, volume and stochastics. Taking profit around the monthly SAR usually a good idea and taking profits never made a man poor.
This strategy, but in reverse
Solana has taken on a fully bullish stack to its daily SMAs and is above both clouds. Both clouds have twisted bullish. The MACD is positive and looking to cross bullishly over the signal line. the 9SR is bullish on most time frames. This set up is appropriate as Solana has positions itself as a "Ethereum killer."
Here is ETH from 2019. I expect it SOL to have a similar rally because it is in a similar situation with regards to previous losses and current strength.
As such, I will be looking to take profit on a Solana trade as shown. Same strategy in reverse. It works long and short if you are patient enough.
MATICSOL
Here is an ABC correction draw on MATICSOL (actually maticbtc/solbtc) with EMAs on the weekly
And here is the draw on the daily set up for momentum. This chart is 100% fully bearish based on the system.
I am biased short for the Ethereum ecosystem as a whole due to all the efforts made to have the system run more efficiently and at a lower cost. Price action will work its way down initially and severely before eth benefits again from the "adoption" trade.
A similar concept is water purification. Imagine water is very expensive to obtain and make potable. Efforts are made to get potable water cheaper and a new system is created that produces drinkable water at 1/10th of the price. The old systems that were in place before the development are going to crash in value as people move to the new system. The price of water is cheap and more people use it than ever before.
Matic is one of the old systems through no fault of its own or its developers. The price of Matic is due for quite a drop and the new Ethereum systems are poised to benefit if they can survive. And then there is the alternative to drinking water. I guess for this example we are talking about having a nice Mexican beer (a very overused pun for SOL). Hell, Cinco De Mayo is around the corner as well
Main Chart
This is technically a very simple play. Which is why I hope it is so powerful. We have a simple chart formation, a rising wedge creating a bull trap. That bull trap is a macro lower high from the all time high. We have a EMA ribbon that was support, and now it is poised to act as resistance. The targeting is likewise very simple. We can set a roughly equal W bottom which would be over a 60% loss from current levels.
Other Charts
I have cobbled together a set of indicators to develop a system to benefit from impulse as much as possible. It is decent on multiple time frames but I an trying to make less trades but bigger moves and tighter stops.
This set up is about 85% complete for a entry. It is a Heiken Ashi momentum strategy that looks to go short when indicators have a "bearish stack" and long when they have a "bullish stack. Ideally I would have waited until the SMAs were bearishly stacked and shorted rallys but shorting a break of the wedge is good enough.
Maticbtc versus LunaBTC
To be blunt, the MATICBTC chart looks like hell. There is a macro double top in blue and a nested double top making up the right top. These two formations cascade to a full target of Matic loosing 80% of its value against bitcoin from here. Absolutely devastating.
One thing scratching in the back of my head is how LunaBTC had a chart that predicted a simuar drawdown but the whole project got obliterated. One target for a rising wedge is the bottom of the wedge. So LunaBTC should have "only" dropped some 80% as well. I am wondering if some similar catastrophe could bit Matic. If not, and it merely loses 80% in a orderly fashion then I will be around to long the W pattern if it is confirmed.
My Trade
I have a pretty good entry. I was very tempted to take an entry in at a break of the purple trendline but the chance that price could have recovered at the wedge for another pump was too high and not enough of my conditions to go short were met. I am closing my trade at the first target and waiting to see if a continuation or reversal pattern develop. It could be a multi-month process.
I have a chart I use for reversals that uses daily and weekly SAR as well as the ADX, volume and stochastics. Taking profit around the monthly SAR usually a good idea and taking profits never made a man poor.
This strategy, but in reverse
Solana has taken on a fully bullish stack to its daily SMAs and is above both clouds. Both clouds have twisted bullish. The MACD is positive and looking to cross bullishly over the signal line. the 9SR is bullish on most time frames. This set up is appropriate as Solana has positions itself as a "Ethereum killer."
Here is ETH from 2019. I expect it SOL to have a similar rally because it is in a similar situation with regards to previous losses and current strength.
As such, I will be looking to take profit on a Solana trade as shown. Same strategy in reverse. It works long and short if you are patient enough.
MATICSOL
Here is an ABC correction draw on MATICSOL (actually maticbtc/solbtc) with EMAs on the weekly
And here is the draw on the daily set up for momentum. This chart is 100% fully bearish based on the system.
Note
The matic portion of my trade continues to perform and the chart is so bad that I think you would have to be a lunatic to be margin long right now. DCAing and other buy the dip strategies make some sense and I myself am looking to buy at the beginning of the wedge. There was a multi-day descending triangle that still has some 6% till it gets to target. I expect some thrashing sideways and then more downside.I am out of the solana side of my trade. Since Sol wend down and Matic went down faster my account is up, but not as much as if I had not taken the long. It was functionally a hedge which is nice. I would have much rather it be one of the coins that seemed to defy the market but you don't always get what you want.
Note
The Matic short is going very well. The MACD EMAS are about to cross and while there is a chance of a relief rally I think I am positioned well enough. My take profit remains near the monthly parabolic SAR.
Note
Matic is on the verge of a death Cross. There may be a relief rally in there some where but I don't think it will be as impressive as the rally that occurred the last macro rising wedge Matic fell out of. Between the daily deathcross and the weekly macd going below zero (my last comment) Matic should be viewed as a full bear market by standard technical standards. Bull market/Bear market: buy dips versus sell rips. Time to sell or short into strength.Note
Recent events have had Matic accused of being a security and improperly traded on various exchanges. "Strange" how this news came out ater a massive rising wedge was being formed. Almost as if the chart knew what others did not. But how can a "chart" know anything?Despite this atrocious news I am not changing trade. I am still modeling it on the ETH trade from the last bear market. I still expect MATIC to stop around the parabolic SAR. Maybe a little above, and maybe a little below. I have a high probability take profit stop market order.
To be clear, in the long run it is completely possible that on the below chart the fib extension 1.0 at 0.1681 or the 1.618 level at 0.0425 levels be reached. It is also possible that those target be reached in a Luna type collapse. But I can't trade too much like a crazy degenerate.
The chart below explains how I will feed my short, if I decide to.
Note
Added to my short with the breakdown of this wedge. Same take profit as before and a stop loss just above the high of the wedge (not shown)
Trade closed manually
I just closed this trade manually. I was looking at the current strength of bitcoin and some other alts and I have made enough money off of this short that I don't want to keep it open any more. Price has come to a major retrace level and I see the potential of a symmetrical triangle due to some bullish divergence. I might be closer to looking for a long entry than going for more downside.A very profitable 6 weeks or so.
Note
I have been targeting for MATIC to have a W bottom for a while. I closed my short about 6 weeks ago because I saw a rally coming and it looks like the time to go short is again upon us. I am shorting something else lower in market cap in the Ethereum ecosystem but I don't feel like doing a whole write up on it. So I am just updating this idea.For a different view we can see strong profit taking between the 100 and 200 EMAs.
Below is my W chart. We have 4 different cryptos that had a W bottom and all for of them have behaved in ways that are valuable to compare and contrast. I think that Ethereum is going to return to the green zone like Litecoin and Monero did. That means pain for the whole ecosystem, Matic included.
Sad to say I think the top runners of 2021 are going to continue a long bear market and consolidation and will stay mostly to the sidelines for this next bull market, with no higher highs.
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