Bitcoin: 35K Area Highly Random.

Jul 25, 2021

30K support still holds and continues to be the SUPPORT AREA in play. In the context of the bigger picture, this area is a HIGH risk for shorts because the location is a higher low within a broader BULLISH trend. In this situation it is particularly important to pay attention to what you CAN'T SEE, rather than getting caught up in single candles.

Inexperienced traders and investors lack the ability to view the market in terms of context. Instead, the typical focus is on a specific oscillator, a candle pattern, or action on a smaller time frame. Their thought process is often anchored by what you can "see". As a market technician, charts are my primary source of information, but at the same time, I consider what you CAN'T see, or what is NOT obvious.

Being anchored by the limitations of a chart will lead people to believe that Bitcoin was a short in the 29Ks, or more recently around the 32K area because of a weak looking candle. Irrelevant opinions run wild, "Bitcoin going to 20K!" etc. Trying to guess where Bitcoin is going by reacting to what you see at the moment is pointless and typical herd mentality behavior.

My point has not changed: Bitcoin needs to prove its strength or weakness before adjusting expectations. Like I wrote in my previous article, either 28.5K is cleared, OR the 36K to 38K resistance is cleared. Until one of those two events take place, Bitcoin is still in a consolidation around a broader higher low. Higher lows often lead to higher highs.

The other part many get wrong is the risk assessment. If you were not confident enough to buy in the low 30's, where the reward/risk made a lot of more sense, why would you be confident now when the reward/risk is much less attractive? Risk is defined by the 28.5 or 30K levels. Along with that, buying now is buying right into the mid point of the consolidation where price action is highly random. This is a good place to be taking a partial profit if in from the low 30's, not putting on a new position.

We recently shared an ETH long idea based on the context of the Bitcoin location. The trade is working out so far. Having the right context allowed us to recognize the opportunity, and having a simple and well defined set of rules justified taking a reasonable risk. How can you gain this type of perspective? Start by minimizing the noise, and focusing on two things: the bigger picture, and asking: "what is price NOT doing right now?".

What to expect from here? A retrace into the 32K area for a potential higher low. This is the formation that we would consider for a new long. As long as the consolidation holds, expectations need to be conservative.

Thank you for considering my analysis and perspective. I hope you find it helpful.