Storm Chasers: Post-ETF Bitcoin Battleplan

Hey everyone, as usual, lots of BTC speculation and fancy line analysis for you. Had a friend ask about entry targets. We’ll cover that. I dedicate this to him and storm chasers everywhere in Bitcoin markets. Is this the the one? The infamous? Before we look forward, let’s take a look back.

The Historic Trade: BTC ATH Edition

Before we head too far down this road, just want make sure we’re all on the same trade. This is the all-time Bitfinex (BFX) $BTCUSD chart. Learn it. Love it.

It took us 3 years to consolidate the range of the 2013 ATH pump.  We’ve now fully closed it and just opened our third consecutive week above the 2013 ATH, a first in Bitcoin history.

When markets enter the extreme of their range, typically an ATH being a great example, it brings out big hands that are placing and taking bets. Whether they’re cashing out big moves or speculating on new ones, extreme range draws extreme participation. This would be especially true in the case of a long trend reversing as the two sides battle it out.

Where’s the participation in Bitcoin? Silence speaks volumes at historic levels. Oh, sure, rising prices affect volume. This could be considered fundamentally normal. I agree, but I also want to caution you on using one exchange to form your opinion.

The Bitcoin market is much larger than one exchange. I don’t have a lot of information on the OTC market in Bitcoin, but I also understand that is massive. You have to realize, the market could easily fill in historic range on the volume scale for any exchange, at any time. We do not write that off to 4 digit Bitcoin.

Ignoring the possibility of a cataclysmic event in Bitcoin security protocols, any historic volume on the sell side should be pretty well contained compared to 2013. It’s the upside I’d worry about, we’ll be trading into the thinnest books Bitcoin has ever seen.

My point, BTC has ramped, crashed, and continued to rise its entire life. That’s what it does and we may just be seeing a continuation of that pattern.

Aurie Philipchuk 12/20/2013

If we were extreme in the range, we would know it by now on the historic scale. I just don’t see it. I see higher highs on lower volume. You need to be careful in easy come markets, but in all seriousness, where are the sellers? If no one is selling it, it can not possibly be an extreme point in the range.

If you’re not going to sell ATH’s, and you’re not going to be shook out, when in the hell are you going to sell it? Hands like that sell into strength. Expecting strength above $1350 anytime soon though, guys? Why haven’t you taken more off yet? This seems like basic risk management. Everyone is still balls deep on their longs. Why? Have you seen how thin it is out there now? What’s everyone so sure of?

We’ve come full circle on that quote from 2013. I wrote that after the ramp. Shortly after, we saw another crash. We’ve only just finished the ‘continuing to rise’ period in Bitcoin’s price.

So, what’s next?

I keep talking about parabolic upside but this is the opportunity I’m buying. It would be a very normal pattern continuation for Bitcoin’s history. This is over simplifying but the major bitcoin markups have basically been adding a zero, failing, and breaking higher to a new zero. Now what? We’re finished with $100 to $1000. Is Bitcoin’s going to stop being Bitcoin?

I feel dirty writing $1,000 to $10,000 but that’s what everyone big holding ATH’s must be hoping for. If Bitcoin doesn’t make a dramatic markup thrust from $1000, it’s breaking historic patterns, no doubt. No one knows how high we’ll go, not even the best. The only way to know is a raw price action discovery of Bitcoin markup. Well, we’ve been advertising ATHs for months. I can’t help but read this as a whale call to draw participating interest for setting the new range.

You have to realize, if big hands just bought all the way up, they’re liable to get hurt if it reverses. They’ve probably built a lot of long interest by now and I can’t imagine they’ll be happy to double down if their unrealized profits start halving. This would seem a perfect example of where market makers may be interested in pump. They’re playing with fire and sooner or later, the next shoe is going to drop. Better for it to drop at a range higher than the one they just bought for the last 3 years, probably.

I don’t think strong hands believe this is fair value for coins. We only confirmed the 2013 ATH valuation and very little came off. That might be because we’ve also put in years of substantiating data and traction since. This is without mention of fundamentals, which are inherently more bullish with each passing day. Have we only $200 of new range on BFX to show for this?

Lack of supply and any meaningful rejection from this zone says no. The longer we stay above the 2013 1W ATH close, the longer it confirms large accumulation is occurring in forsaken ranges most would of us would consider insane.

This could be one, or even, the last consolidation market makers have to cover their tracks and accumulate historic ranges. If we print new post-ETF ATHs, the secret most certainly should be out across the world on big hands buying Bitcoin. We’ve run out of upside and there’s still nothing but panic wipes and buying to speak of. Look at the 1min ETF news, stunning buys on bad news.

We thought we were waiting around for ETF, but in reality, we’re probably waiting for this whale call to play out, whether it delivers or not. Sooner or later, we need to reprice the range. That may not be today but markets need that measuring stick to set years of trading range. If it’s not now, all these wound up longs will have to unwind into weakness as we trade back into established zones. That could be ugly and could snap our up trend for a while. I think if this were such a concerning risk though, again, we would have seen a lot more confirmation in the form of sales.

So there you have it, some basic context on this historics at play here.

Breaking it all down

Comment 1: Incoming Decision Points

Those two green eye marks will be important decision points in Bitcoin markets. Allow yourself to understand the chart because this stuff plays. We have a Q1 2017 trend line intersecting with the only bearish inflection in sight. I won’t tell you where that goes but that’s the first test. We’re going to see definite short term direction from there and whether a buy opportunity is about to improve.

If it fails to break the Q1 2017 trend line, you’re sitting on your hands for the second decision, ATHs. If you’re looking for long cover, you need a breakdowns of either of these decisions. With the moves we’re chasing, yeah, better dig a bit of a hole there, buddy. Safety first and all.

If it breaks out on both of those, sorry guys, that’s the disadvantage of being late. Don’t chase it. Please don’t. Just wait. I don’t care how far it goes, wait. When it comes back, and it will, be the guy who steps up bid into a flaming inferno of hell. That’s where you buy Bitcoin FOMO ranges.

So for your sake, let’s hope we see a breakdown of one of those decisions first.

Comment 2: Buy targets

I want to preface this again with the fact I don’t predict markets in my trading. I do not call tops and bottoms. I trade to the expectancy of the pattern.

I say this because I put these targets here, but don’t go hopping in front of the market with this. If it comes back to these targets, that’s just the cue to start shopping. You aren’t predicting here. You buy established ranges and only higher lows. Do not buy lower lows. Watch the broad periods, please. Stop on lower lows, no argument. Play your stops even, these can be murderous spots. You will get blown out if you fail to stop. No question.

So there you have it. A word of caution. Now, where to shop?

First, see ‘Potential buy zone 1’. That’s the pink rotated rectangle on the 2017 channel support. If we support that channel, which we very well could, you could try buying some retest that comes near or preferably, below the green channel line and into the bottom of the pink box.

If we don’t stop there, I’d wait for ‘Potential buy zone 2’, the 2013 1W ATH close and the Q4 2016 trend line. Look to buy higher lows hopefully below the Q4 2016 trend line, and above the 2015 1M bar channel support. If we break both these levels, it’s cutting deep. Let it unwind and sort itself. Of course you could be shorting these breaks but they’ve been day trader quick. I think the opportunity is still better long. We have no idea how far down it might go and how violent the volatility might be. If you want to short it let the short trend develop first. These have been bull markets. I’d bank on that before anything else until further notice.

Only 4 Days to Decision 1

Here’s the 4H zoom of our current range. Lots of technical traffic up here. Watching where the red line intersects with green for an indication of short term direction. Be ready for that, if we break that, the retest can happen quickly in bull markets. If it’s good for buys, you’re in the wick and seeing rejection almost immediately after buying. If it’s not, you’re in a world of pain and almost instantly stopped out.

That’s the trade formula and if it’s deviating from that, it’s not the spot we’re looking for. It could be right, but that is not a pattern that confirms our trade. Remember, instant stop, or instant winner. Sideways, wrong spot. Got it? Trust me, that’s the safest cover you’re going to find in a range, this ain’t my first FOMO. Bitcoin is a worthy adversary so that part about playing your stops, yeah, it is possible to be both right and buffed on a wick.

You should have some sell targets in mind as well, expressed as a multiple of your stop loss. Somewhere at least over 5-10 times your risk for this type of trade. There is a very particular formula in this for systems traders like me, feel free to ask if you’re wondering about this stuff.

Keep in mind, “let your winners run”! You’re looking for way more than 5-10R here, but you need a plan if you want to be in position for potential repricing thrust. You let your winner run and sell into thrust strength, if it happens. If it doesn’t and you’ve hit your targets, you have to protect profits by considering the trade failed and exiting on any significant loss from top. Any other situation, wait for stop or target and let the trade play.

Ramble On

Well that was a long one. I know this is dangerous spot so just hoping to pass the gravity of that to anyone chasing this. Been there done that. That danger is what you want though, never forget that. It’s a traders best friend. You need to learn to embrace it, understand it, and throw down while everyone is having a frothy about getting blown out.

Good luck, everyone. Place your bets. We’re going to find out on this historic trade soon enough. It’s been well confirmed since I started following it here.

PS: Feel free to drop any comments here or on my Twitter. I post lots of charts and BTC commentary there lately.

If you like my Bitcoin charts, I make them available to everyone. You can access an interactive copy from the menu bar of this website. From there, you can create a TradingView account and save a copy for yourself.

 

Aurie Philipchuk

Founder of Huddlco. Blockchain enthusiast. Jack of all trades. Interested in building the new generation of great companies? Let's connect.

 

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