Bitcoin: Buy Signal Off Higher Low.

12 ธ.ค. 2021

Bitcoin has established the higher low formation and generated a new buy signal in the process. If you have been following my analysis closely you should recognize this scenario since I have been describing it publicly over the previous week. I am not going to provide specific swing trade details but I will offer general clues in terms of managing risk and reward.

There were two specific scenarios that I outlined in recent live streams. One of them was the higher low followed by a reversal candle. That candle (bullish inside bar) appeared yesterday and the high was taken out around the 49,500 area. Risk is defined by the length of the entry candle (typically around 4K points). This means initial profit targets should be between the 53 to 55K area. This is the general scope of a swing trade, which is NOT the same as a position trade or investment. If you are not sure of what is swing trade is, you should NOT be risking real money.

People often ask: where do you think Bitcoin will go on the next leg higher? I have NO idea, and neither does anyone else (although there are many who pretend to know). I observe markets in terms of risk and probabilities which I gauge by evaluating price action and market structure.

Profit targets should be a function of risk, not greed. It is structurally within reason for Bitcoin to probe as high as the 55 to 57K resistance over the next week or two. If you are in a position that is in the profit by greater than 1.5:1 or 2:1 in terms of risk, it is a GOOD idea to lock in some profits and try to let some ride to see how far price wants to go.

Keep in mind, the recent bearish leg that took price to 42K makes a strong argument that Bitcoin is likely in a broad Wave 4 formation. Wave 4's can be persistent corrective formations that are full of false starts, false breakouts, etc. In order to prove otherwise, Bitcoin will have to now clear 69K by a significant proportion which can take months to play out.

If Bitcoin is in a corrective consolidation, then retesting range lows is STILL a reasonable possibility. At this time, the range lows are between 42 and 45K. IF Bitcoin fakes out and takes out the higher low established off the mid 40's, then the range low test is more likely.

You must keep an open mind and a passive mindset. Thinking in absolutes or assuming risk based on some irrelevant opinion will eventually put you at the mercy of the market. Being in this type of position means you rely on the sentiment of the herd to go your way before you are shaken out (or margined out) of your positions. Have you seen many alt coins that were going to make "millions" for "early investors" over a month ago? Some of them are off their highs over 40%. There are many investors that are stuck in these things HOPING the herd comes back to let them out. Not a good position to be in.

Thank you for considering my analysis and perspective. I hope you find it helpful.