From the last post we made it clear we are in an intermediate downtrend which usually lasts for quite a while. But even in these downtrends we usually get some upward movements known as RELIEF rallies. These are just 5-10% moves in the opposite to the trend in contrasted to the 20-50% intermediate trend runs. And here's how we could be facing one right now.
Pulling up the 4-hour chart, we'll notice the ( ) indicator has always given us entries and exits. Factoring in the in bitcoin trading, we will use 75 and 25 on the as overbought as oversold respectively. For a long scenario, we wait for the to dip below 25 for the FIRST TIME since it had been above 75. And after the FIRST CANDLE closes with the pointing upwards, that close of the candle becomes our LONG entry (long entry = short exit). Likewise with a short entry, we wait for the to go above 75 for the FIRST TIME since it had been below 25. And after the FIRST CANDLE closes with the pointing downwards, that close of the candle becomes our SHORT entry (short entry = long exit). For both these cases although not necessarily, a more cautious trader would want to wait for a 3% retrace before jumping in. That's it!
But you swear you saw another indicator passing across the chart, the heck with that?! That is the 120 MA (Moving Average) and in this case our only reference indicator. Despite it being a great indicator in acting as on the 4-hour chart, it can also expose fake outs and shield us from taking risky (bad) trades. Typically, you SHOULD NOT enter a long when the RSI-pointed entry is MORE than 10% away from the 120 MA. And NEVER enter a short when the RSI-pointed entry is LESS than or around 10% away from this MA. This applies to ENTRIES ONLY, exits remain as previously explained.
Seeing as the last time the went below 25 and first pointed up at the close of $9080 with the 120 MA at $9275, we could be looking at a short relief run to the upside. Taking in the 3% retrace, that puts us at $8815. Therefore, around $8700 where we are, would also be a great opportunity to enter this kind of trade aiming for the $9300-9450 range at best. Cheers.
This is NOT financial advice. Please do your own research and understand trading derivatives has high risk.