Bitcoin Reversal Zone, Which Way From Here?

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Updated: Dec 3, 2020, 08:09 UTC

The price action over the recent two weeks has been eye catching to say the least. With all kinds of news and hype luring more and more longs, you would think price should be above 20K by now. But it's not.

As I have written about previously, the 18,500 inflection point, along with the 20K psychological resistance seems to be asserting itself. Even though price technically made an all time high, it does not change the fact that the 20K to 20,200 area is a highly vulnerable location to put on new longs. If anything, these prices are a place to reduce risk, not assume it. The reason is the chances of a fake out are high.

As I write this, a new inside bar is developing. A break of the inside bar high would be a new buy signal, while a break of the inside bar low will be a new sell signal. Based on the high risk of this location, taking the buy signal is NOT attractive relative to the rules that we employ for our swing trade strategy. Just because a signal appears does not mean the risk is worthwhile.

A break of the inside bar low (around 18,300) makes more sense based on the probability of the resistance area in general. This scenario could be the start of a corrective leg that can lead back to the 16,300 area which is a notable support. Between 17500 and 16300 is where we are most interested in new long setup.

Our strategy focuses on broader moves which means high probability setups are infrequent, along with that, we do not short Bitcoin and have maintained that policy since the beginning. So we have no choice but to WAIT for the rules to be satisfied before putting on a new SWING trade.

To give you an idea of frequency, in the month of November there were 5 buy signals. We chose to stay out of all of them because the location was not adequate. 2 of the 5 would have reached potential profit targets of about 1K while 3 of them would have stopped out thanks to the sharp sell offs. Based on a reward/risk of about 1.5 (about our average), the net outcome from all 5 trades would be somewhere around break even. More trades do not equate to more profit.

This is why we look for opportunities across multiple markets and have been focusing a lot of attention on stocks. Want to know more? Check out our 7 day free trial