Prescription Hopium
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Bear Case:
50/200 MA "Death Cross" has already happened on some exchanges (50 goes below 200), and should complete across the board by tomorrow even if we see a short term reversal. This is one of the core signals of a downside reversal in a market, but the caveats are that it must occur with rising volume and with both the 200 and 50 MAs in decline. Neither is true of the current state of the bitcoin market, and the cross has been delayed by the intense sideways chop we saw all of last week. That said, it's a massive psychological level and we could see sharp selling if a few large market orders get put in. Margin shorts are stacking quickly on this assumption and they are likely targeting anywhere between 7k (realistically) or 6k (as a stretch given declining volume). So we could see a sharp drop to these levels if the cross happens with rising volume on lower timeframes. The intermediate trendline (white dotted) failed during the week, so we're now balancing on supports at the convergence of the long-term zones a(discussed later) and the local low @ ~7300, keeping in mind too that the daily is forming a bearish engulfing candlestick.
Bull Case:
There were 2 bullish continuation patterns at the start of 2018. The descending wedge appeared to be violated by the close below on 2/5 and continuation into 2/6 to form the bottom of this year's downtrend, but the 93% reversal that followed suggests that structure is still in play. Price is currently above the resistance line of that formation, which converges with the 7-7.25k buy zone. Stops for these longs should be scattered from 7k to 6.7k, the core long term support formed by the symmetrical triangle with baseline anchored at 11/12/17. A turnaround at these levels would suggest a possible W-bottom reversal with a higher low (first vertex would be that 2/6 low @ 6k, which absolutely must hold tbh). Stoch RSIs are low and plummeting across all time frames, but that indicator has been ~11% less reliable at signaling reversals so far this year than in 2017. Divergences have also been ~17% less reliable. The hit rates of both indicators are still > 65% year-to-date. The kijun has flattened bullish despite the intermediate decline that started 3/3, which continues to suggest that the core of the sell-off preceded the 6k bottom from February. On 4/1, price action will be below the first bullish segment of the daily kijun since 2/10, which would be the start of an "end-to-end" play if a reversal begins to play out around then; flat kijun typically acts as a magnet for upward price action, but we'd have to be at or above 12k by the end of April. The more impactful resistance levels are therefore going to be the proximal ones created by the stacked shorts and their stop losses (8.5 - 9.2k]. Then there's also the psychological barrier created around that zone by the market sells by the Mt.Gox trustees earlier in the month as part of their bankruptcy settlement. The immediate task ahead for bulls though is to hold that 7k (no lower than 6.7).
Posture: Balanced out the portfolio to be BTC heavy (~70%) in order to limit compounded losses from holding alts (loss vs btc, btc loss vs usd) and have bids in at 6.9k to average down the bags I've been hodling for the last month+. Had some stops in at 8.8k that opened up some fiat for that. FInally, BTC market dominance is at 43% and rising quickly. If ETH, XRP and LTC declines continue then we'll see a rapid climb to that 50% level. That's often been a psychological level that triggers flows from btc to alts, so I'll rebalance back towards big cap alts once we cross 49% BTC dominance - thinking down to 55% BTC.
50/200 MA "Death Cross" has already happened on some exchanges (50 goes below 200), and should complete across the board by tomorrow even if we see a short term reversal. This is one of the core signals of a downside reversal in a market, but the caveats are that it must occur with rising volume and with both the 200 and 50 MAs in decline. Neither is true of the current state of the bitcoin market, and the cross has been delayed by the intense sideways chop we saw all of last week. That said, it's a massive psychological level and we could see sharp selling if a few large market orders get put in. Margin shorts are stacking quickly on this assumption and they are likely targeting anywhere between 7k (realistically) or 6k (as a stretch given declining volume). So we could see a sharp drop to these levels if the cross happens with rising volume on lower timeframes. The intermediate trendline (white dotted) failed during the week, so we're now balancing on supports at the convergence of the long-term zones a(discussed later) and the local low @ ~7300, keeping in mind too that the daily is forming a bearish engulfing candlestick.
Bull Case:
There were 2 bullish continuation patterns at the start of 2018. The descending wedge appeared to be violated by the close below on 2/5 and continuation into 2/6 to form the bottom of this year's downtrend, but the 93% reversal that followed suggests that structure is still in play. Price is currently above the resistance line of that formation, which converges with the 7-7.25k buy zone. Stops for these longs should be scattered from 7k to 6.7k, the core long term support formed by the symmetrical triangle with baseline anchored at 11/12/17. A turnaround at these levels would suggest a possible W-bottom reversal with a higher low (first vertex would be that 2/6 low @ 6k, which absolutely must hold tbh). Stoch RSIs are low and plummeting across all time frames, but that indicator has been ~11% less reliable at signaling reversals so far this year than in 2017. Divergences have also been ~17% less reliable. The hit rates of both indicators are still > 65% year-to-date. The kijun has flattened bullish despite the intermediate decline that started 3/3, which continues to suggest that the core of the sell-off preceded the 6k bottom from February. On 4/1, price action will be below the first bullish segment of the daily kijun since 2/10, which would be the start of an "end-to-end" play if a reversal begins to play out around then; flat kijun typically acts as a magnet for upward price action, but we'd have to be at or above 12k by the end of April. The more impactful resistance levels are therefore going to be the proximal ones created by the stacked shorts and their stop losses (8.5 - 9.2k]. Then there's also the psychological barrier created around that zone by the market sells by the Mt.Gox trustees earlier in the month as part of their bankruptcy settlement. The immediate task ahead for bulls though is to hold that 7k (no lower than 6.7).
Posture: Balanced out the portfolio to be BTC heavy (~70%) in order to limit compounded losses from holding alts (loss vs btc, btc loss vs usd) and have bids in at 6.9k to average down the bags I've been hodling for the last month+. Had some stops in at 8.8k that opened up some fiat for that. FInally, BTC market dominance is at 43% and rising quickly. If ETH, XRP and LTC declines continue then we'll see a rapid climb to that 50% level. That's often been a psychological level that triggers flows from btc to alts, so I'll rebalance back towards big cap alts once we cross 49% BTC dominance - thinking down to 55% BTC.
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