Bitcoin: Another Sell Signal?

Sep 4, 2022

Another minor lower high established around the 20,500 area but during a holiday period where price is likely to be very indecisive. With that, the bearish price action in the S&P and new highs on the Dollar are still facilitating an environment that favors LOWER prices over the coming week or two.

As I have been writing for WEEKS, the bearish argument for the markets in general is CLEAR and has not changed. This means expect LESS from long signals and more from short signals. Until this context changes, expecting Bitcoin to rally in an economic environment that is not helpful for highly speculative assets is nothing more than irrational hope. In case you haven't figured it out yet, hope does not pay the bills.

For those interested in shorting Bitcoin (I'm still not shorting it), a momentum continuation sell signal will be in play upon the break of 19,500 (swing trade idea). The risk can be measured from the 20,500 to 21,000 AREA. Keep in mind, 17K is the profit potential which in itself does not offer the most attractive reward/risk. Taking a momentum continuation signal is aggressive because often these occur at levels that are less attractive.

To manage a trade like this, the idea is to give the market a chance to break 17K while at the same time going into this expecting to be wrong. Yes it is counter intuitive but this defensive mindset compensates for assuming risk at much lower probability levels. With this in mind, it would be wise to take a partial profit off at 17K IF the market offers such an opportunity.

IF bearish momentum follows through, and 17K is cleared, then 14K becomes the next support and area to take profits. Again this is NOT a certainty, only a potential scenario that carries favor with the price structure and environment.

Markets are highly random, which means they cannot be forecast accurately over long time horizons. If you believe otherwise, or worse, believe others who claim otherwise, then you will be misled by an opinion. Having an opinion implies you know more than the the market. Unless you have inside information, by thinking this way, it is almost certain that the market will empty your account. Respect the market, it is ALWAYS right.

The best we can do is generate multiple short term scenarios that are based on technical information, while accounting for external factors that carry a lot of weight (like interest rates). This is how I assign probabilities and can make more objective choices (and NOT rely on HOPE). Assigning probabilities means you are preparing for the possibility of being right AND wrong. Knowing how to manage RISK (being wrong) is what leads to a better outcome for your account.

Thank you for considering my analysis and perspective. I hope you find it helpful.
(Tomorrow is a U.S. holiday, stock market is closed and I will not be conducting any streams).