Chartpunk Bitcoin Alpha #62
Join me on the journey to a 250k+ Bitcoin price! We will definitely have some good and bad times on this bumpy road, but with good alpha we will be able to ride strong trends and avoid sharp losses. Being a trend trader, I am not promising to pinpoint exact highs and lows, but I hope my view will assist you in making your own decisions.
HTF Market Structure
During last Friday night the Bitcoin market has experienced a flash crash which has liquidated more than $2 billion worth of leveraged long positions. As Nietsche once said, if it does not kill you it makes you stronger. I belong to the Bitcoin class of 2015, and I have seen such events before, but waking up to such a traumatic market environment always leaves scars behind. It is now time to re-evaluate our approach to the market, and see what might be waiting for us.
I deleted the ascending channel from the high time frame Bitcoin chart, and added a horizontal channel, which basically shows to us that Bitcoin has spent this year oscillating sideways between the levels of 30k and 60k. I am considering the uptrend of July as invalidated. Due to the oversold stochastic RSI and the strong upwards trend of July the odds have been favoring a reclaim of the territory over 60k, but unfortunately the market has decided differently, and the verdict has been served in a rather harsh manner. Accordingly, I am considering Bitcoin to have returned into the horizontal channel.
The fact that the price has been able to make a close above the descending trendline of April may provide us with some hope, and turn out to be a retest of the trendline. The following weeks will tell whether this is true. If however the price action returns under the trendline, and flips it into resistance, then I will be expecting further downwards continuation, and the bulls will have to postpone their expectations of a $100k Bitcoin price for a while.
The AVWAP level of the July uptrend is currently at 50400, the bulls should reclaim this level and flip this into support as soon as possible. If that could be done, then the price could go up to the next resistance at 56000, which is both a trendline and an AVWAP level.
As I said above, the descending trendline of April is currently at 47300, and I consider it as a very important support of the bulls. As I said, if price action returns under this trendline, we can most likely say goodbye for high price hopium in the close future.
LTF Market Structure
The low time frame Bitcoin chart has been controlled by the bears since the middle of November, and the bears have done a remarkable job. Following multiple bounces off the downwards trendline and the AVWAP downtrend levels, Bitcoin has lost the key level of 53000, and took a nosedive down into the support zone just above 47000. As we can see on the chart, between the levels of 53000 and 49000 there are no significant horizontal supports, hence the harsh fall.
The zone of 47000–48500 is holding as support for now, and I can easily imagine a relief rally into the 53000–55000 region during the coming days. I think that we will see some consolidation between these zones for the coming period, and a subsequent breakout into any direction will be able to show us the future.
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What is trend trading?
Trend trading is a market strategy that is reasonably different from swing trading or day-trading. A market “trend” is a tendency of a financial market price to move in a particular direction over time. Swing traders and day-traders are usually trying to pinpoint low-term market tops and bottoms, and take aggressive positions expecting to profit from a swift change of market direction. Trend traders are looking for consolidated and strong directions on a given market, and are trying to ride the trend for as long as possible. These traders normally enter in the market after the trend “properly” establishes itself. My core strategy in trend trading is to look for a market setup where the long time frame market structure is indicating a solid trend, and intact price action is supported properly by the low time frame charts.
What are my key indicators?
I am using trendlines, channels and moving averages to identify market structure and to spot trends. In crypto trading my core moving average indicators are the 50 and 128 daily moving averages. I am also using anchored volume weighted average price (AVWAP) analysis to identify support/resistance levels.
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The present article is a free material, for entertainment and educational purposes. Nothing in this post shall be considered as financial advice, you shall never make any financial decisions or financial investments based on a singly source of information and without doing your own research.