The Wolf Den #16 - Bitcoin At Key Resistance, Alt Trades, News And More.
BTC Thoughts And Analysis
MONTHLY CHART
The monthly chart remains the same - we have had a clear reversal based on the support and resistance levels drawn. You can see that price is once again at a key resistance. Last month I tweeted an observation about the long wicks on the monthly candle and how I viewed them.
As you can see by looking at the monthly chart now, this was an excellent signal that sellers were losing strength and that buyers were stepping in. The present candle currently has a lower wick with none on top - it will be interesting to see how this candle closes at the end of the week.
WEEKLY CHART
A picture tells a thousands words. After a false breakout two weeks ago, price managed to hold the top of the channel last week. The present candle is clearly breaking out, but has 5 days left. This is what we need to watch!
DAILY CHART
This was my update from last Tuesday, showing the same chart.
"One line to rule them all - the black line. It is very clear by reducing the noise on the chart that there is one key area that determines the break from bear to bull on the daily time frame. This area (lines are elastic, they should be viewed as zones) needs to be flipped to support before I view this as a true bullish trend."
One week later and we are here again. I still believe that this is the key area on the chart. Bitcoin will need to make a significant move up to break this area - there is potential bearish divergence with RSI on the daily chart. In a perfect world, we will see a strong rise in price and RSI will concurrently rise above the previous high. Remember - we DO NOT BUY RESISTANCE.
Checking the pivots (which are mathematically calculated, not arbitrary), we can see that price has been rejected once again at the R3. The key red line is in perfect confluence with the R2, and the R1 support price on a few candles. Pivots are a really great tool for finding confluence of support and resistance, as you can see here. The R3 is close to the key line on the chart, so a move above that and flip to support would be very bullish and would target the next pivot.
These are the key ranges that I am watching. As you can see, price has moved above the red range and the EQ (equilibrium, center dashed line) of the green range. It is presently testing the top of the fresh blue local range and finding resistance. We want a clean break of this area, as I have mentioned on almost every time frame.
6 HOUR CHART
The break of the blue line was a clear signal that price was ready to continue up. At present, price is working on breaking the key line discussed, which was tested last week. We want to see price hold above this line now and not fail like we saw previously. This will eliminate the inevitable "double top" chatter that will inundate Twitter.
A Note On Volume
Volume tells all. A true trend is identified when volume is rising. Blue arrows show volume and price in agreement. Red arrows show price action on descending volume. Price and volume both going down = consolidation, not a bearish trend. Volume appears to be rising with price again.
Traditional View On Asset Allocation
Her is a quick summary on the traditional view on asset allocation. Individuals should hold a percentage of stocks equal to 100 minus their age. For a typical 40-year-old, 60% of the portfolio should be equities. The rest would comprise of high-grade bonds, government debt, other relatively safe assets.
The thinking is that this helps you reduce risk over time. You reallocate to safer investments as you age and reduce exposure to the stock market and riskier assets. Many mutual funds with target retirement ages are structure to do this automatically.
Things have changed. People live longer than they used to and "safe" assets have far lower yields (we had 10% savings accounts when I was a kid!). Therefore, this rule can be revised to 110 or 120 minus age to be more aggressive.
Crypto should be viewed as a higher risk asset within the aforementioned 60%. You can break down the 60% (for a 40-year-old) further to large cap, mid cap and small cap stock etc - there are lot of ways to skin the cat. The younger you are, the less cash you need on hand.
Everyone should have an emergency fund in cash that would cover 6-12 months of all expenses. After that, you can effectively allocate everything else to investments while you are young, and you can decide which investments based on your risk tolerance and timeline.
Lesson - How To Trade With Ichimoku
I was planning to write a series of lessons at some point about using the Ichimoku Cloud. It is one of my favorite indicators that I utilized heavily in the past and throughout the bull run of 2017. Luckily, my friend Trader Smokey beat me to it! This guide is comprehensive and includes effectively everything that I would have shared. I suggest giving it a read - and then another - there's a lot of essential information.
Viruses Vs. World Markets
The Wuhan Virus is the talk of the world, with grave concerns about a global health crisis. Investors and traders are equally concerned about the health of the market and the likely reaction to the coronavirus if it continues to spread.
What does history tell us about viruses in the past? While every case is unique, it is clear that global health issues have rarely negatively impacted markets. The below graphic, borrowed from the linked article, clear shows this.
Markets have effectively been immune (pun intended) to this sort of outbreak. That said, the market itself appears ready to correct - there are other global concerns, the fed has been propping up the Dow for ages and the charts look overextended. The world could enter a "risk off" environment and move away from stocks and riskier equities.
However, trying to time the top is a fools errand. The market is been "ready to correct" for years and has continued to rise.
The million dollar question - is Bitcoin a riskier asset or a safe haven?
One Forbes writer believes that Bitcoin is becoming a risk-off asset, especially in China. I always find it interesting that these articles appear anytime price rises - I don't really buy into this thinking yet, as I view Bitcoin as risky. But I feel it is important to present this argument so that all of you can draw your own conclusions.
Start Investing Now!
This is obvious, but is an important point to continue stating. The best way to accumulate wealth is to invest early in your life, as often as possible, and with money you can afford to leave in the market until you are older. Period. I tweeted some numbers a while back.
The difference in how much wealth you accumulate based on the age that you start saving is astounding. If you are reading this, there's no better time than now to start saving money.
Altcoin Trades And Charts
Risky, risky, risky. Bitcoin looks ready to make a significant move, which is rarely a good thing for altcoins in their BTC pairs. Keep your risk management tight if you are planning to trade alts today! Most opportunities now look like they could potentially be "falling knives." Let's not try to catch the bottom!
The best time to trade alts is generally when Bitcoin settles down and moves sideways - that could happen again soon. In addition to the trades shared below, I remain in ADA and EOS.
AION/BTC
I started buying this 5 days ago between 800 and 840 sats. As you can see price was rising daily and has continued to do so since the tweet below. The breakout and retest failed when Bitcoin decided to jump - standard. However, price retested a key resistance as support and bounced (black line) and volume has continued to rise. I bought more at that black line and remain in this position. A move below that line would be a signal that the rejection from resistance is real and that it's time to exit. I am averaged in around 825, so I do no intend to lose money on this if it drops.
BAT/BTC
Same setup as a week ago. A break of the upper line would be a signal of likely price continuation. I have an alarm on that top line.
ETC/USD
This thing is absolutely raging. The weekly chart shows key levels and that price has made a move through the strongest resistance on the chart.
The daily shows the break more clearly. I missed this, so I am hoping for a retest of this blue box on the daily or weekly as an entry. The wave count shows a possible wave 5 ending in the area of $17, although an eventual move to the upper box is possible. I expect a bit of retrace soon, as RSI is overbought on the weekly. But this could go full FOMO and leave me behind - which is fine.
TRX/BTC
I remain in this trade from 186, as discussed a week ago. Price finally broke the purple descending line with dramatically increased volume. If Bitcoin allows this to develop, there is a ton of potential for further upward movement.
XMR/BTC
Alarms are set for a break of descending resistance. Still a clear rejection for now, but endless potential if volume comes in on a break of that line.
Legacy Markets
APHA (APHRIA INC.)
I wanted to update this since someone requested it last week. I took this trade as well, but quickly stopped out just below the black line when the market dumped. APHA took a particularly significant hit. This is a reminder to keep your risk management tight - we all lose on trades. Also, it serves as a reminder that charts are a bit less effective in legacy markets, where global news and fundamentals matter much more.
At present, I am watching to see if price can break back above the key levels noted, including the descending line and black line.
DJI - DOW JONES
Everyone is bearish on the stock market, but yesterday's candle leaves room for a potential morning star. The pattern is made up of three candles: normally a long bearish candle, followed by a short doji, which is then followed by a long bullish candle. Today will tell. You can see that we had a similar pattern a few weeks back (although the 3rd candle in the pattern barely qualified), which indicated further price continuation. It still appears that dips are for buying. Once again, eyes on the fed tomorrow.
The weekly chart shows that price dropped and bounced perfectly at local support. Funny how that works! I will be watching to see if that massive gap is a breakaway and signaling continued movement down, or if it's going to end up being a clear fill and predictor of a move up.
A Quick Lesson On Buy Walls And Sell Walls
People constantly mention sell walls as being bearish and buy walls as being bullish. If you believe this you are buying into the story that the whales are trying to tell you. A sell wall stops price so that someone can BUY. A buy wall holds it up so that they can finish SELLING.
Entering an order that you do not intend to fill in order to manipulate price action is illegal in legacy markets. Since we are trading in the wild west, it's perfectly acceptable behavior in crypto.
If you truly are trying to sell a large quantity of an asset, you would never put up a huge sell order. It's against your own interest, because you are stopping price and scaring buyers. Real sellers sell in smaller chunks as price is rising. They may even use a buy wall to help.
You do not need to watch order books, it's more likely to confuse you than to help. Trade the chart.
Top 10 Crypto Traders To Follow In 2020
Spoiler - I made the list. That said, these kind of lists are click bait and are completely arbitrary. The "best" traders are likely not on Twitter at all! Still flattered to be mentioned, and in the company of some great Twitter follows.
Grayscale (GBTC) Now Reporting To SEC
This is notable, as it gives further credibility to Bitcoin and Crypto as legitimate assets. "The landmark achievement pushes Bitcoin one step further into the traditional financial markets, gaining regulatory oversight as the digital asset emerges from the shadows of Silk Road and lands in the portfolios of Wall Street investors. The top US securities regulator will now require Grayscale to file quarterly and annual reports as well as submit audited financial statements." We are maturing!
The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor.