UNISWAP → Dropping to $4.80? Let's Maximize Your Profits!
Updated
Uniswap has had two major sell signals followed by a drop below the Daily 30EMA. We're now staring at the 200EMA and the $4.83 support, should we short here?
How do we trade this? 🤔
It's reasonable to short in this area o the 4HR or Daily chart. Use a small position size since we're a ways into the fall from the high, set a stop loss above the 30EMA and go for a 1:2 Risk/Reward Ratio down to the $5.20 area.
The price action is currently playing out a kings crown pattern; a massive bull candle, rough head and shoulders top, and a a massive bear candle retesting the support the bull candle started on.
💡 Trade Ideas 💡
Short Entry: $5.80
🟥 Stop Loss: $6.10
✅ Take Profit: $5.20
⚖️ Risk/Reward Ratio: 1:2
🔑 Key Takeaways 🔑
1. Fell out of Bull Channel, Trend Reversed.
2. Fell below Daily 30EMA.
3. Gap to 200EMA and opening of Large Bull Bar.
4. RSI at 46.00 and below Moving Average, Bias to Short.
5. Watch for Bitcoin Trend Change at $46,000.
💰 Trading Tip 💰
The 30EMA and 200EMA ribbons are reliable support and resistance levels. They will often line up between timeframes.
⚠️ 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? 🤔
It's reasonable to short in this area o the 4HR or Daily chart. Use a small position size since we're a ways into the fall from the high, set a stop loss above the 30EMA and go for a 1:2 Risk/Reward Ratio down to the $5.20 area.
The price action is currently playing out a kings crown pattern; a massive bull candle, rough head and shoulders top, and a a massive bear candle retesting the support the bull candle started on.
💡 Trade Ideas 💡
Short Entry: $5.80
🟥 Stop Loss: $6.10
✅ Take Profit: $5.20
⚖️ Risk/Reward Ratio: 1:2
🔑 Key Takeaways 🔑
1. Fell out of Bull Channel, Trend Reversed.
2. Fell below Daily 30EMA.
3. Gap to 200EMA and opening of Large Bull Bar.
4. RSI at 46.00 and below Moving Average, Bias to Short.
5. Watch for Bitcoin Trend Change at $46,000.
💰 Trading Tip 💰
The 30EMA and 200EMA ribbons are reliable support and resistance levels. They will often line up between timeframes.
⚠️ 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
My sell signal was premature! We should have waited for another attempted high on the right side of the crown before entering. Hindsight being 20/20, I should have added a note about waiting for the right shoulder to appear and show a sell signal before entering. I have provided additional depth and detail in the comment section regarding this trade. I believe its still a valid trade, but the signal and entry are updated. We need to be looking for a lower high followed by a sell signal here for this trade to work. As noted in my comment:
Statistically, the Kings Crown pattern tends to play out with these specific qualities: large bull car closing on its high and that close is the top of the second leg up in a trend, another leg up after that with a sell signal (third leg with a sell signal, means look for confirmation of a reversal, the next step is a lower high with a sell signal and a gap down to the 200EMA ribbon to complete the crown.
This is technically a reversal trade which inherently is low probability, in response to your preference for trend trading which I am also a fan of. So the chances of this playing out are technically lower than playing the trend. In fact, it’s statically probable that after this pattern plays out, the trend continues upward.
Uniswap has been in a trading range on the Daily chart for 18 months and the top of the range is between $6.50 and $7.50, right where we are now, so it’s reasonable to start to expect major resistance (and a reversal) which is partially why I chose to display the reversal trade rather than a trend trade which is also reasonable given we haven't confirmed the reversal yet. We also have Bitcoin and the entire crypto market burning hot and there’s a myriad of datapoints to think this isn’t the bull run to new all-time highs. My analysis here:
When we're playing a reversal in a bull trend, we're looking for a setup and the first thing you look for is the reversal pattern, lower highs, and confirmation. Reversal trading inherently is lower probability, lower risk, high reward because you’re looking to capture the earliest entry in the trend.
A significant data set supporting this trade is this *exact* pattern played out this past July and August and I mean, the EXACT same pattern as I was proposing we trade here:
The resemblance is almost uncanny and with the market burning hot, Uniswap near the top of the range, all of the datapoints line up exactly to this moment. More of this data should have been included in the initial analysis and the caveat to wait for entry after another lower high, thus, the reason I'm adding this content now.
More updates to come as the events unfold!
Note
Uniswap attempted a break above the trading range resistance area, falling back down to the line and drifting sideways. We have 5 days left on this candle. If the idea of a short is to remain alive, we need this candle to close below the trading range line. If we get a strong close above near or on the bar high, the trading range ought to be considered invalidated, especially if a followthrough bar occurs.
Data points in the favor of a breakout are that we're now above the Weekly 30EMA and it's showing support, 4th bounce on $4.00 support. Let's keep on eye on the 4HR and Daily chart for signs of a breakout!
Note
Uniswap gave us a third leg up on the Daily chart, slightly popping out of the trading range similar, but ultimately failed to close last weeks Weekly candle above resistance. This weeks candle is off to a bad start after the crypto sell-off when Bitcoin hit its measured move target of $46,000.
As previously described in my updates and comments, we should be looking for a short at this point in the market cycle. If you were watching the 4HR chart, there was a good 1:2 Risk/Reward short opportunity after a nice Head and Shoulders reversal pattern, followed by a strong bear candle closing on its low. A great entry when you combine that with Bitcoins resistance at $46,000, a higher probability reversal trade on the lower timeframes.
If you missed that entry, wait for this bear candle to close below the 200EMA and take the 1:1 Risk/Reward scalp toward the same take profit area of the 1:2 Risk/Reward trade depicted in my chart. Use a smaller position size for the 1:1 trade since you're initial risk is higher meaning, you have more money to lose because your stop loss is further away from your entry.
Zooming out to the Weekly chart, the trading range is still holding and thus, our bias must remain short on the Weekly timeframes until we break out of this trading range to the upside.
-Joe Dean
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