Bitcoin: Bullish Pin Bar! Why Not Buy?

13 Mar 2019

Bitcoin update: Even in the face of a bullish pin bar, it is still reasonable to say that this market is going no where fast. Candle stick formations are random and what gives them any analytical value is WHERE they appear. Since our swing trade exit at 4125, we have been PATIENTLY WAITING for a setup that offers attractive reward/risk.

The typical trader craves action, but the market does not care what the typical trader wants. Good marketers know this and capitalize on this characteristic of human nature and they will write or say ANYTHING to capture attention (which is what they effectively monetize). The best information that you can get is on your chart, but it may not be as exciting as the marketer leads you to believe.

REALITY or the truth is often what the crowd does NOT want to hear because it is boring and uneventful. And the reality about Bitcoin is it goes into slow grind periods for weeks at a time, followed by some large movement which gets the herd all excited again. The key to navigating this type of environment is to pay the MOST attention when the market is not only quiet, but also in an attractive location.

Is Bitcoin in an attractive location to buy at the moment? In my opinion NO. The high 3800's to the 4100 area is a broader resistance zone. Sure, price may grind through it, BUT the risk is NOT worth the potential rewards at this point. Beyond the reward/risk we also consider the "personality" of this market in such a location. Fake outs and lack of follow through are more likely because Bitcoin is NOT in a strongly trending environment. Recent structure continues to offer plenty of clues that hint toward a range bound market. And in ranges, buying near highs (especially out of boredom) is not a productive behavior over the long run.

Overall, we want to see price test and develop a setup around the 3500 - 3600 area or the 3300 area. Those levels are at least closer to the range lows and are much more attractive in terms of risk compared to where price is now.

Keep in mind that there is also a potential bearish pennant developing. It is too early to make any judgements, but the appearance of the positive sloping converging trend lines serves as another reason to WAIT for a better situation when it comes to taking a swing trade long.

In summary, it is better to look for all the reasons to stay out of a trade than it is to find every reason to be in. Eventually you will run out of reasons to be out and that is usually when the rare and high quality opportunity surfaces. There is no reason to get excited over a couple of pin bars, especially when the location is NOT favorable.

Think less about profit and more about probability. That is how to effectively navigate an environment that is filled with constant uncertainty. We will continue to WAIT for a better price area before initiating another swing trade long. We don't hunger for action, instead we embrace reality and WAIT until the market meets our criteria. WAITING is what generates the profits over the long run, NOT chasing.