Bitcoin Rally Continues But Lacks Confirmation

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Updated: Feb 4, 2021, 13:49 UTC

After the double bottom formation around the 30K area, price has produced a new buy signal. We shared a new swing trade long at 33,650 which went to it's first target in the 38K area quickly before pulling back. This price action is still very normal for a range bound market.

We chose to stay in the position (which was far from our stop order) and price has now tested the 38’s again. What is lacking now is follow-through. While this may be the beginning of a Wave 5 which can lead price into the mid 40Ks, it has yet to confirm.

Confirmation requires 42K to be compromised. At the moment, price is hesitating off of the 38K area. While this price action is still in line with a consolidation and potential break out, the key to trading it effectively is to avoid unfavorable reward/risk ratios and that all begins defining risk.

Taking a swing trade long above 34K does not offer an attractive reward/risk because a proportional stop would have to be placed in the 29 or high 28K area. You would have to risk 5 or 6K points while hoping price can at least reach 40K before locking in some profit. The wide stop is relative to our specific swing trade strategy and is purposely placed in order to minimize the chance of getting stopped out, particularly in noise.

So this means one thing: DO NOT chase Bitcoin at these levels for a swing trade. If 40K resistance holds, and it retests the low 30Ks again, there will be another opportunity. If Bitcoin breaks higher, there will likely be a continuation pattern that will offer better reward/risk as well.

If you would like to know more about how our strategy works, visit https://greenbridgeinvesting.com/pricing