After trying to reverse twice off of the 57K support, Bitcoin has broken the level and is now poised to test the 48 to 50K support. While current prices offer an attractive location for a swing trade long, there is no signal to take such a position. So how can Bitcoin prove that a new long is within reason?
Understanding market context is key to making an effective decision. After a series of lower highs and lower lows resulting in the 57K support break, it can be argued that the current price structure and momentum is bearish (this will be obvious on small time frames). What novice traders get confused by (because oscillators don’t account for broader context) is the fact that price is probing support areas. Small time frames will call for being bearish, while the probability of the location (something you can’t see) calls for being bullish .
The bearish structure is correcting a broader BULLISH trend. This means when price reaches a notable support level (like the 50K area), bullish activity should be anticipated, but what kind of bullish activity? Since the recent structure is bearish, MORE confirmation should be considered before being able to justify taking any risk. In this situation, a single candle reversal pattern like pin bar is NOT enough and would be considered highly aggressive.
Waiting for price structure to prove stability comes in the form of recognizing a double bottom, or higher low formation AFTER price has tested the anticipated support. WAITING is not popular with the typical trader or investor because everyone believes they are going to “miss the next move”. So far anyone that got lured into all the “forecasts” of BTC reaching 85 or 95K over the next month got in TOO EARLY. If you haven’t figured it out yet, HIGH quality opportunities are rare and not advertised on public platforms.
The other mistake to avoid is reacting to what you see, especially if its going against the broader context. IF Bitcoin clears 53,500 that would generate a new sell signal on this chart. While it may make sense for smaller time frame strategies, the risk of reversal is very high as price fluctuates into the low 50K area.
When markets correct, it can be very confusing, especially if you do not follow a specific set of rules and have a clearly defined strategy. Technical analysis offers ways to measure risk, evaluate probabilities and formulate a set of rules around particular market behaviors. “Making money” is not a strategy, it is a potential outcome that comes along with an associated risk.
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DISCLAIMER: The article is predictive, not calling for investment. Every decision is yours to decide.