Bitcoin: Sell Signal Back To Range Low?

20 Mar 2022

Bitcoin continues to consolidate between the 42 to 45K resistance and 35K support. This consolidation within the broader context is still a LOWER HIGH. Lower highs often lead to lower lows. The other key factor to consider at the moment is the correlation and vulnerability of the S&P. After the recent FOMC press conference, the market "appears" to be in rally mode, even after a rate hike. Why? We'll get into it but as far as taking positions and managing risk there is really nothing to do here unless you are into aggressive shorts.

Markets act as a discounting mechanism which means they price in the future. During the FOMC press conference, Chairman Powell kept the talk as dovish as possible which the MARKET interprets as "less likely to raise" or "raise aggressively" in the future thanks to geopolitical concerns. So markets rallied and Bitcoin followed along even though logically, rising rates should act as a negative pressure. This is the same effect as when a stock reports good numbers, but then sells off after the report because the numbers were expected. The positive move is usually going into the report, not after it.

Ok enough macro fundamentals! How to trade this thing? After all the herd is obsessed with magic oscillators and enjoys buying hope and being lied to. Hope is not something I provide (plenty of other fake gurus for that). Here is what to consider for the coming week:

1. There is a sell signal in place now off of the range resistance zone. IF there is any negative catalyst throughout the week, Bitcoin is in a vulnerable position (along with the S&P) to test the mid point of the range (37 to 38K?) or possibly the range low at 35K. Expecting a break is the same as flipping a coin at this point but broader price structure still favors such an outcome.

2. A buy signal develops off of the 35K area. This is the overall support and higher probability location for swing trade longs. Until price reaches this area, I have no interest in assuming any swing trade risk.

In these situations where the short term trend is in question, it is best to be more selective and wait for specific locations (where the random nature is less likely). Having any opinions or using logic in this environment especially will be confusing and problematic. Don't think, don't react. Plan and anticipate. Let the market figure everything else out.

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