I'm posting this idea so I have a record of my ideas and hopefully start a discussion. This is not to be blindly followed or taken as investment advice... please please please DYOR!
Line of Thinking:
We are forming a potential Head & Shoulders pattern on the 4hr. We are currently moving down forming the right side of the right shoulder after having a failed IH&S on the 1hr. If we close this 4hr candle anywhere bellow $34121 Stoch will turn down, and ADX is currently strong with DI- positive and DI+ negative, which makes me think we will at least testing the neckline.
There is some big hidden divergance on most indicators, including the DMI which I often find does not show as much divergance as the others, which leads me to think this divergance should be given good weight in the trade decision. We used up so much momentum to get down here there's nothing close to it on the charts, but we did not make a lower low, which shows the bears are struggling.
The target from this pattern is pretty crazy and sits around $18200. I'm not sure if we will get down that low, but the 21 week EMA is just above that area and I think the old ATH will act as very strong psychological support. If we do make our way to the target, id expect bounces at the levels highlighted (which are also where I would scale out (see TP1)), like we have seen the past 2 days, some of which were around 10%.
Volatility is still redlining and will have to come down at some point, which would imply sideways with a slight upwards skew. I've not been able to find a stretch of PA with volatility sustaining this level, so in not sure how to use that. It could mean that due to its mean reverting nature the more it prints red the higher chance we contract and slow down for some time, or it could be a warning as it shows that the market is still going crazy. Maybe its all the new investors who don't have super strong crypto hands pulling funds back out?
I've adjusted my risk due to this huge divergence and the volatility. If the R:R was not 1:4.58 and I didn't have a spot position that I do not touch, I probably would not take this trade. Since I do, its basically a hedge on any further downside.
Trade Details:
Entry - $30769 On retest of neckline after breaking through. If the retest moves back above the neckline, depending on the signals at the time I may add on slightly.
SL - $33125 Reasonably big to avoid any stop hunts ruining the fun.
TP1 - $26500 / $24000 / $22600 I will scale out of the trade on the way to the target at the levels in-between.
TP2 - $20000 I don't think we will go lower then the 2017 ATH and I prefer to take profit before the pattern target.
Yorum
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Right shoulder has not played out yet, and it looks like there is a potential IH&S on the 1hr. Need to wait and see where this goes.
Yorum
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The IH&S has now been invalidated as its not played out and we have moved to far right for it to form the pattern correctly. Normally the shoulders should be roughly equal distance and height. I have noticed there are big wicks on both sides of the range ($35000<$35800 - $33120>$32720), showing strong pressure from both bulls and bears. This makes me think we are going to go sideways for a while and shake out weak hands.
Its hard to know which side will break right now, but im rooting for another correction for long term healthy growth of my hodling bags. Im looking at DOT and UNI right now as ALTs preform well when BTC goes sideways and they have been doing better then most since the dump.
Yorum
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H&S has almost been invalidated by this pump, the right shoulder cannot form properly now unless this pivot sends up back down in the next few bars. DI+ is positive and stoch momentum is up with a lot of room to breath. Also those big wicks on the bottom give bias towards upside since they are not mirrored on the top. If we can break this pivot and then the resistance at $36500 I will consider the trade in this picture. Im not sure if I think we are ready to go back up but there's no point in fighting the market.
Emir iptal
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Now it is definitely invalid. Time to look for the next play after some sleep.
I really liked the fact that you showed how a pattern is invalidated based upon a specific timeframe.
Keep up the awesome charts and analysis.
MrBetonBlocks
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@jamesaphoenix, Thanks :) Im still learning so I may be wrong to use the timeframe like I did, but it really does seem invalid. Ive read that the psychology of trading can cause people to hold on to a pattern for much longer just because they want to be right.
jamesaphoenix
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@MrBetonStonks, Yeah, I also like zooming out to look at the macro trends, then micro-trends.
I'm still learning but have been mainly doing 3 - 6 month position trading when the market has major swings.
peterk87
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I think if it was to inverse it would of headed towards the 36.5k area. However it failed to pass the 35k and I therefore I still expect a retest around the 30k area. Top work, looking forward to more of your analysis 👍
For days now it's been laughable how a lot of traders have been tracking a huge imaginary H&S pattern. Unless you are just one of those unknowledgeable fellows spreading disinformation for lack of something better to do then - Do yourself a favour, Google search H&S, step back and compare what you initially thought was invalidated . Fudging your coordinates doesn't make it close to looking like an identifiable H&S pattern.
MrBetonBlocks
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@innocentAccoun35113, im happy to learn what ive done wrong. The whole reason I started posting my ideas is so I can find out what im doing wrong. What do you mean compare what I initially though was invalidated? Do you mean compare the formation in the second comment? From what ive read the pattern does not have to be perfect and the rarely are, can you link what you are talking about? From my quick google most of the ones with candlesticks and not a drawing are not perfect. 1 - school.stockcharts.com/doku.php?id=chart_analysis:chart_patterns:head_and_shoulders_top_reversal and mql5.com/en/articles/5358 are just some examples
MrBetonBlocks
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@innocentAccoun35113, it was also forming on RSI which is a good way to spot messy H&S patterns (according to google)
Keep up the awesome charts and analysis.