We maintain our target level of 9500 by Christmas, and this is looking more like Christmas in June than a fall rally. The structure is bullish not bearish, yet many are still calling for a double top. Is there a valid argument here or is this confirmation bias?
Remember, every new high begins with taking out the previous high, so any equity moving higher has the potential to double top every time it pushes higher. Assuming it double tops here is making a big assumption as before a new high is in place, it has to pass the old one. Every break out is a potential double top and how did that work out at 4200 & 5500? Nobody knows whether we double top here or breakout, all we can do is prepare for either scenario. Marc wrote a great piece on Bitcoin going to 10k, and both scenarios.
All In or All Out
Most have an opinion that you are all in the market or all out and are either right or wrong. You see this with many analysts who are calling for "long" one day, "short" the next, heck I even seen one recently that had both scenarios in the same day. What is that? Seriously how do you run a signal service with so much noise and confusion. I guess it puts you in a position to claim you were right either way. But it is not about being right, wrong or guessing the next direction, its preparing for either scenario.
The goal of the investors is to position for broader moves, but also have a back up plan in the event a pullback happens. Tom Lee pointed out that being out of the market during the top 10 days every year since 2013 resulted in a 25% loss. This is often the reason short term traders under perform longer term buy and hold over longer periods.
Even when you catch these moves, the excitement of profits leads to exiting too early like we saw at 4000-4500-5000 putting them in a position hoping for a pullback to extreme lows. That left a lot of money on the table, and puts you in the hope strategy which is a hopeless one. In fairness we trimmed out a partial position at 6300 but it was less than 1/8 of our overall Bitcoin holdings in our model portfolio we started in the hole last June.
The goal of this portfolio was to use April's prices, putting us in the hole to start off, and getting the portfolio back into the green. As of today we are at a negative 4%. Not bad since most coins are still well under last year's prices, let alone last April's. Our initial cost for Ethereum was $533, BCH 1052 and every coin in our portfolio is still less than the average April 2018 initial cost. We used a combination of position trading and adding monthly to DCA and fade the market. Were we perfect? NOPE but we don't have to be, we only need to be patient, and stick to our strategy.
Many studies show that 95% of traders under-perform buy and hold strategies. There are so many exceptions here on TV I kinda wonder about this ;). I'm kidding, I think it is more like 99% based on many of the gurus here. Hey there are some good traders here, don't get me wrong, but most are simply weather forecasters with vague calls and taking both sides.
Like I said in my last article we are clear: Buy the dip! Anything under 7k is a buying opportunity, anything under 6k is pocket Aces and I will be pushing. If it does push this low, you should wait for some confirmation of a reversal before shoving your remaining stack all in. Many that are calling for a retest of 3200 have simply sat and watched the move higher, which brings into play confirmation bias. They have a bias opinion and look for anything that confirms this.
Now you can say, "hey goldie, you were bias to the long side ever since I can remember". This is true, but is based on the general principle that markets move higher in the long term, and I am an investor first, trader second. This is Warren Buffet's principle for investing, markets move higher in the long term and I concur with Warren here. I am always positioning for a broader move higher.
Having Cash on Deck:
Since we are about 85% invested in the market at this time, if Bitcoin breaks out we are in. We kept 10-15% of the overall account in cash, in the event we are wrong and we do pull back. In other-words we are prepared for a move either direction and can act accordingly. Since we are still way below our target levels in the broader picture we have no issue with buying the dip.
Of course we will trim positions here, add positions there, and overall attempt to increase our inventory for the longer term move. I do this in stocks and we are applying this same strategy to cryptos. We use position and swing trading strategies to build inventory either reducing the overall average cost of our holdings, or be in coins for free.
All we can do is wait for the market to reveal its hand. In the broad term I personally believe 25k is a valid target, and do not see 45k as unreasonable. I break this down in an article that is currently being edited, on whether Bitcoin 400k is both fundamentally and technically feasible. I draw the conclusion that....... wait I am not going to spoil it before I print it.
So what about a potential double top?
Nothing to be scared of. The overall structure is still bullish and if a pullback happens before moving higher, the support remains the same, but the possibility of dipping into 5150 to 5750 the support area increases in probability. Calls for 4500 and lower are screams of "the sky is falling" here, and though we do not discount the possibility it is a low probability at this point in the cycle. Anything is possible, and if it pulls back to these levels I am a buyer and will likely add fresh money into the market.
Regardless of where it goes in the future, in the short term we remain bullish for 9700, after of which we are looking to buy the pullback into the 6-7k area. Depending on where it tops, will depend on where we look for support. There is no topping signal yet regardless of those screaming for a major pullback or double top. Other than position there is simply no evidence yet. Assuming a double top might happen, can have you missing a strong breakout to the upside. Speaking of signals.
Price Action:
Based on price action alone, the current setup is a continuation pattern, making a move higher more likely than a move lower. Now if Bitcoin takes out the 7450 level, maybe we already printed a double top, but until this happens it is simply an assumption. Even if it does take out 7450 it only increases the chance of a double top, no guarantee it doesn't suck in shorts, and reverse in their face. Not like that doesn't happen every 3 months or so.
I mean if I was a whale, this is exactly what I would be looking to do, which is why shorting here is dangerous. So what if a whale dumps into these levels, "what will we do ohhh my"? Simple, just hold through the pullback, and since we are not leveraged, we are in a position of being a strong hand. Yes weak hands will be selling here, not strong ones.
In the end it is not about being right or wrong, it is about managing your portfolio for either scenario and being a strong hand. We are ready to act if the price moves higher or lower, we are not guessing the direction with "all in - all out" moves. This is most likely the beginning of a broader swing towards 25k. Clearly the risk is being out of the market and missing the bulk of the move.
This is no longer a bear or range bound market, it is a bullish one. We have nearly 6 months of higher highs and higher lows, which is indicative of order flow to the buy side. Nothing on the charts has changed this, and guessing that order flow to the buy side dries up here, may have you missing the next leg up.
Remember, every new high begins with taking out the previous high, so any equity moving higher has the potential to double top every time it pushes higher. Assuming it double tops here is making a big assumption as before a new high is in place, it has to pass the old one. Every break out is a potential double top and how did that work out at 4200 & 5500? Nobody knows whether we double top here or breakout, all we can do is prepare for either scenario. Marc wrote a great piece on Bitcoin going to 10k, and both scenarios.
All In or All Out
Most have an opinion that you are all in the market or all out and are either right or wrong. You see this with many analysts who are calling for "long" one day, "short" the next, heck I even seen one recently that had both scenarios in the same day. What is that? Seriously how do you run a signal service with so much noise and confusion. I guess it puts you in a position to claim you were right either way. But it is not about being right, wrong or guessing the next direction, its preparing for either scenario.
The goal of the investors is to position for broader moves, but also have a back up plan in the event a pullback happens. Tom Lee pointed out that being out of the market during the top 10 days every year since 2013 resulted in a 25% loss. This is often the reason short term traders under perform longer term buy and hold over longer periods.
Even when you catch these moves, the excitement of profits leads to exiting too early like we saw at 4000-4500-5000 putting them in a position hoping for a pullback to extreme lows. That left a lot of money on the table, and puts you in the hope strategy which is a hopeless one. In fairness we trimmed out a partial position at 6300 but it was less than 1/8 of our overall Bitcoin holdings in our model portfolio we started in the hole last June.
The goal of this portfolio was to use April's prices, putting us in the hole to start off, and getting the portfolio back into the green. As of today we are at a negative 4%. Not bad since most coins are still well under last year's prices, let alone last April's. Our initial cost for Ethereum was $533, BCH 1052 and every coin in our portfolio is still less than the average April 2018 initial cost. We used a combination of position trading and adding monthly to DCA and fade the market. Were we perfect? NOPE but we don't have to be, we only need to be patient, and stick to our strategy.
Many studies show that 95% of traders under-perform buy and hold strategies. There are so many exceptions here on TV I kinda wonder about this ;). I'm kidding, I think it is more like 99% based on many of the gurus here. Hey there are some good traders here, don't get me wrong, but most are simply weather forecasters with vague calls and taking both sides.
Like I said in my last article we are clear: Buy the dip! Anything under 7k is a buying opportunity, anything under 6k is pocket Aces and I will be pushing. If it does push this low, you should wait for some confirmation of a reversal before shoving your remaining stack all in. Many that are calling for a retest of 3200 have simply sat and watched the move higher, which brings into play confirmation bias. They have a bias opinion and look for anything that confirms this.
Now you can say, "hey goldie, you were bias to the long side ever since I can remember". This is true, but is based on the general principle that markets move higher in the long term, and I am an investor first, trader second. This is Warren Buffet's principle for investing, markets move higher in the long term and I concur with Warren here. I am always positioning for a broader move higher.
Having Cash on Deck:
Since we are about 85% invested in the market at this time, if Bitcoin breaks out we are in. We kept 10-15% of the overall account in cash, in the event we are wrong and we do pull back. In other-words we are prepared for a move either direction and can act accordingly. Since we are still way below our target levels in the broader picture we have no issue with buying the dip.
Of course we will trim positions here, add positions there, and overall attempt to increase our inventory for the longer term move. I do this in stocks and we are applying this same strategy to cryptos. We use position and swing trading strategies to build inventory either reducing the overall average cost of our holdings, or be in coins for free.
All we can do is wait for the market to reveal its hand. In the broad term I personally believe 25k is a valid target, and do not see 45k as unreasonable. I break this down in an article that is currently being edited, on whether Bitcoin 400k is both fundamentally and technically feasible. I draw the conclusion that....... wait I am not going to spoil it before I print it.
So what about a potential double top?
Nothing to be scared of. The overall structure is still bullish and if a pullback happens before moving higher, the support remains the same, but the possibility of dipping into 5150 to 5750 the support area increases in probability. Calls for 4500 and lower are screams of "the sky is falling" here, and though we do not discount the possibility it is a low probability at this point in the cycle. Anything is possible, and if it pulls back to these levels I am a buyer and will likely add fresh money into the market.
Regardless of where it goes in the future, in the short term we remain bullish for 9700, after of which we are looking to buy the pullback into the 6-7k area. Depending on where it tops, will depend on where we look for support. There is no topping signal yet regardless of those screaming for a major pullback or double top. Other than position there is simply no evidence yet. Assuming a double top might happen, can have you missing a strong breakout to the upside. Speaking of signals.
Price Action:
Based on price action alone, the current setup is a continuation pattern, making a move higher more likely than a move lower. Now if Bitcoin takes out the 7450 level, maybe we already printed a double top, but until this happens it is simply an assumption. Even if it does take out 7450 it only increases the chance of a double top, no guarantee it doesn't suck in shorts, and reverse in their face. Not like that doesn't happen every 3 months or so.
I mean if I was a whale, this is exactly what I would be looking to do, which is why shorting here is dangerous. So what if a whale dumps into these levels, "what will we do ohhh my"? Simple, just hold through the pullback, and since we are not leveraged, we are in a position of being a strong hand. Yes weak hands will be selling here, not strong ones.
In the end it is not about being right or wrong, it is about managing your portfolio for either scenario and being a strong hand. We are ready to act if the price moves higher or lower, we are not guessing the direction with "all in - all out" moves. This is most likely the beginning of a broader swing towards 25k. Clearly the risk is being out of the market and missing the bulk of the move.
This is no longer a bear or range bound market, it is a bullish one. We have nearly 6 months of higher highs and higher lows, which is indicative of order flow to the buy side. Nothing on the charts has changed this, and guessing that order flow to the buy side dries up here, may have you missing the next leg up.
