Our swing trade has completed with both targets being hit, and we trimmed half our position trade locking in some profits. In addition we made some portfolio adjustments as we prepare for the next leg higher.
Overview:
Our swing trade has completed with both targets being hit, and we trimmed half our position trade locking in some profits. In addition we made some portfolio adjustments as we prepare for the next leg higher.
There is nothing to do here but wait. We say this a lot and we continue to emphasize patience is critical in any market. You are not going to catch every swing, every move, or every dip. The key to success is waiting for the market to provide an opportunity not force trades.
Bitcoin Grinds Higher
Bitcoin continues to grind higher, but is entering an area where there is a lot of resistance. Up and until now Bitcoin has blown through resistance after resistance level without an after thought. Does this pattern continue or do we see a flushing of longs?
There is a huge difference between a rally pushing new highs as we saw in 2017, and the initial bull leg after a major correction. This is also a more mature market with a lot of larger players in it.
Even though we are pushing the interim high, there is still a bearish pinbar that is reason to pause. On the weekly and after a solid multi month rally this carries a lot of weight.
We are not looking for a deep correction, only a shallow one. The 9800 level is enough of a pullback for us to consider the correction complete, but is it?
Regardless of if the correction is complete and we entered a wave 3 in the broader picture, there will be periods of consolidation. This is where opportunities arise for both swing and position trades.
Currently the 9800 level is broader support followed by 8500 where we would be aggressive buyers. In the broader picture the market is very bullish, and for those new, with no exposure, there is nothing wrong with adding a starter position anywhere.
Yet for those of use who have existing positions, we want to be wise in our placement of new positions. This market is overly bullish and it can pullback.
Markets do not reverse because of Fibb or EW the reverse when they run out of buyers. Historically the most people are joining the party at or near the end of the cycle. Nobody wanted to buy Bitcoin at 3600, however as we mentioned back then, they will be the buyers here.
Bitcoin Short Term
In the near term, we are entering an area of caution. Technically this extends up and into the 16k level, but on the shorter term 13,200 to 14750 is an area to look for reversals.
Bitcoin does not have to reverse here, but the probabilities of a reversal increase near previous highs. Those in from lower levels start locking in some gains, swing traders are closing out positions, and position traders that bought the dip, are doing the same.
This is what makes these areas so prone to a pullback. This is also an area where many bought the dip in 2018 and are now close to break even or in the money somewhat and may close out their position.
Regardless if we pullback or not, starting bad habits will lead to getting caught eventually and exposing you to portfolio erosion. You don't miss anything playing it safe.
The 13,200 is the 78.6% retrace of the prevailing bearish swing and overlaps with several extensions and less weighted broader resistance levels. This makes it prone to the bull run failing here.
Why these overlapping levels are important is due to the various participants in a market at any one time. Different strategies are looking at different technical levels, and when numerous ones overlap they become more significant.
Any hesitation in price action will also see momentum traders exit quickly. Unless there is something we are unaware of, like a near term release of TD Ameritrade allowing for Cryptos, there are not too many investors looking to add here.
Of course with all the new products set to come out in the near future this could be front running by larger firms.
The 11,000 to 11,400 is an area we are looking to go long out of. A push into 10,500 would have us adding another position to our remaining position from 10,100. Profits from the previous position trade will be added here.
This creates compounding over the long term, however what if we don't pullback?
Monero
Monero has a solid chart here and is behaving like it is in a broader consolidation. There is a clear 5 wave count that completes the initial cycle in the broader term and has pulled back to retest the trend.
This is on our radar for a possible long both as a position and a swing trade.
Completing the Correction
Monero has a very clear structure and whether this is a B leg or the initial swing in a broader move is insignificant. It is printing a bearish reversal here and though it is early it may be implying that the market overall is set for a pullback.
IF Bitcoin can push higher there is the potential for Monero to complete another leg to 115 plus or minus. However if it takes out today's low, we are likely to see a retest of the low, higher low, or double bottom variation.
This is a better and more conservative to take a trade or position out of.
Ethereum
Ethereum initially followed Bitcoin but has also since posted a bearish reversal candle. This does not imply we can't move higher, but raises a red flag of a potential bullish fake-out here.
This is also happening at a traditional resistance area adding more weight to an interim top here. It is likely it takes a few attempts to break this level and we would rather take the cautious and prudent approach and see if it retests the main support level at 280.
A retest of this area would be where we would be looking for longs, not here. The risk is elevated for a bullish fake-out and as you can see it is not showing the strength of Bitcoin. This adds evidence that the market overall is consolidating.
Ethereum has all the characteristics of a consolidation cycle and it is prudent to let it play out, or look for a better opportunity in the future.
Bitcoin Cash
Bitcoin Cash is showing signs of fading. Though it had an nice rally back in May the air has simply come out of the balloon. Failing to clear the 515.0 level is a sign of a failed high situation.
In addition buying momentum is getting weaker as evident with the head and shoulders pattern evolving. A weak right shoulder is a clue that the market is stalling and a break of 380 could push Bitcoin cash back to retest 300.
This is one reason we decided to close out our position here. It is showing signs of cracking everywhere and IF it does, we don't want to be caught.
Litecoin
Litecoin was leading the market and still well may be. It is in the 4th week of a consolidation period and has a well defined bullish structure in place. However there is still room to swing lower.
I like the 80-100 area as an area to be aggressive but the 110 level is enough of a pullback to complete wave 2. I would still like to see another leg down before adding to my position.
For transparency, this is my largest position outside Bitcoin. I bought a lot of Litecoin in 2017 and have a decent bag. This is indicative in the model portfolio, but my percentage is greater than shown.
I used Litecoin a lot for transfers so I still have a lot of Litecoin and I also use it for trading Forex and CDF's in MyFxChoice.
Summary
With most of the top alt coins showing evidence of being in a broader correction cycle we have to assume Bitcoin is in one as well. Bitcoin has redeemed itself as the market leader and we look for it to provide guidance for future positioning.
Yet we can not ignore the market as a whole, which is clearly pausing here. Until we see more evidence that the market has completed its cycle we simply wait. Guessing the next move is a fools game of gambling.
Adhering to our rules has kept us in the green and we are not about to give up any profits just to play a hand or two. No different than playing poker, we are always thinking of capital preservation over the hope a weak hand plays.