The Wolf Den #22 - Fear Vs. Greed, BTC, ETH, Trade Ideas And More
Bitcoin Thoughts And Analysis
Bitcoin is at a bit of a crossroads and could go either way. Sometimes there's just no clear direction being shown on the chart, so I will present both sides and let you use it as you may. I can say definitively that I see no reason to take a position on either side at current price. This is a situation where higher time frames remain bullish, but the TA becomes a bit shakier as you zoom in.
MONTHLY CHART
We are just over half way through the monthly candle, so it's hard to gleen any significant information. We would like to see price closing higher than now - certainly not lower, as that could form a shooting star or inverse hammer, both of which would be potentially bearish candles. They would only be bearish if the March candle was red, so nothing to worry about here for the moment. Price was clearly rejected at the $10,300 level for now - not a surprise on this time frame.
WEEKLY CHART
The macro picture is still bullish. Price never goes straight up and retraces are necessary for a healthy bull trend. Price was clearly rejected at the red line - which is unfortunate for the moment, because a move above that line would signal a higher high and the end of any rational bear case. That said, one would totally expect that rejection and for price to require consolidation to break through such a key area. For now, the black line at $9574 is the closest weekly support, so it would be nice to see that hold. A move below would target the low $9000s, which lines up with lower time frame analysis.
DAILY CHART
The daily gives a decent picture of what is happening. Price topped out right below the previous swing high and has dropped since. Volume has also dropped, indicating that this is more likely consolidation than a fresh bear trend. Price is currently sitting on the 21 EMA as support - this has been a key line, so bulls would really like to see it hold. $9,522 (that area, not specifically that line) is a key local support on this time frame. A move down to the 50 EMA would coincide with the key line at $9,090.
4 HOUR CHART
I am not in love with the 4 hour chart. There's a somewhat ugly head and shoulders pattern (I don't love the right shoulder) and price was rejected at the red neckline as resistance. It broke above temporarily but now is trading below. Further, there's hidden bearish divergence with RSI on that brief move up. If price cannot recapture that support area (around the red line), then the target of the head and shoulders would be around $9000. This would make sense as it is in confluence with an area of support (blue box) and would still amount to a very healthy retrace of the recent move up. This would also line up with the $9,090 line that I have shared so many times.
That said, it's not all bad. Price made a bullish SFP (wick below and close above) the blue support line. Price action above that area without a close below still remains positive. Further, there is a clear descending broadening wedge (blue lines), which statistically is more likely to break to the upside. Price has touched the bottom support 3 times.
Volume has been dropping with price during this correction, which means it is not necessarily a true fresh bearish trend.
Fear Vs. Greed, A Short Story
I love this story, because it reminds me of mistakes that I have made in the past. I am quite sure that it will resonate with all of you as well. Almost every trader has made a similar error. Making the mistake is not a problem - the issue is if you did not learn from it!
Scott Barkley is the president of ProAct Traders. In this story, he recalls suffering heavy losses trading Silver (XAGUSD).
“I had been trading Silver up for about a year. I was making more pips than I thought possible and succumbed to a rookie mistake even though I had been trading for 15 years. I let the two emotions that beat most traders take a hold of me: fear and greed.
My left brain did not engage and control my right brain and I entered at the top, sure that Silver was going to break the $50.00 mark. The market immediately flipped on my trade and I thought that was a minor correction. I pulled my stop and lived through the correction, then decided to cost average this with a second position. The second trade forged ahead and I was sure that, at the least, I would get to break even on the first trade and profit on the second. I set a large stop and when I came back to my computer found that the market had turned 700 pips. Of course I lost on both trades with a huge loss to my former robust account.
My hard lesson was: Never let greed or fear run your trading. The left side of your brain is the analytical side and it has to control the right side (where flight or fight reside).”
Always trade your plan and never let your emotions get the best of you!
Ethereum
Quite a few people have asked me for my view on Ethereum. As I stated recently, I am quite bullish on Ethereum in the long term, so much so that I recently moved my holdings to my long term portfolio, freeing up more Bitcoin for trading alts. From a fundamental standpoint, DeFi (Decentralized Finance) seems to be the wave of the crypto future, most of which is built on Ethereum. In another section of this newsletter is an article from Coinbase on DeFI, in case you need a quick primer.
From a technical standpoint, there is quite a bit to like both on the BTC and USD pairs. Let's looks the large time frame charts as of yesterday.
ETH/BTC
WEEKLY CHART
It is easy to see why one would be bullish on the weekly chart on the BTC pair. Price has broken above a major level of support and resistance, shown by the blue rectangle. Any price movement above this remains bullish. Further, price is presently attempting to flip the 50 EMA (blue) to support. There is plenty of time left in this candle, so nothing is confirmed yet.
Zooming in on the same weekly chart, we can see a double bottom that was confirmed with a break of the red neckline. Keep in mind, a retest of this area would be no surprise as a flip to support, so do not be shocked if it drops back to the red line.
ETH/USD
WEEKLY CHART (2/17)
This is perhaps even more bullish than the BTC pair. As you can see, price bounced off of long term support and broke the descending resistance from the all time high. Price started a new trading range at the $81 bottom, topping out at $364, the new top of the range. Price is now back on the top half of the range and should make a trip to the upper resistance (in theory).
Price is also trading above the 21 and 50 EMAs on the weekly - the 200 EMA does not exist yet on this chart. Both are curling up, with a potential golden cross incoming. I would also not be surprised to see a drop and retest of the 21 EMA, around $230 at the moment.
I managed to buy the dead bottom in 2018, and am still holding half of that position.
DAILY CHART (2/17)
If you have been with the newsletter from the beginning, then you have seen this chart countless times. I bought the breakout of that descending channel and have not sold. My concern here is the struggle at the 61.8% fib, which could have this seeing a bit of a retrace. However, volume has continued to rise and all of the EMAs are pointing up as support.
DeFi For Beginners
A quick and simple basic guide to understanding decentralized finance. This is part of the reason that I am generally bullish on Ethereum.
Altcoin Trades
As I mentioned in the intro, I have taken profit on alts and am only currently in a few short term trades. Most I have talked about quite a bit, but there are a couple worth highlighting. I am not going to inundate you with charts today, because I don't want you to jump in a ton of setups while Bitcoin is shaky.
HOT/USDT
This is a bit risky, but anything above that blue support box looks bullish to me. I have filled some more orders there. I like the risk reward of a position, because you can place a stop below that box and lose very little. The overall setup still looks extremely good.
LINK/BTC
LINK and TEZOS looks similar - both in price discovery of new all time highs. For now, I am looking to entry on a drop back to the previous all time high. Not sure I will get it, fingers crossed.
MATIC/BTC
MATIC recently bounced off of long term support (bottom red line). Holding this line would be bullish and should lead to another significant move up. First I would like to see 212 flipped to support as well as the descending red line broken. I think that this setup has massive potential.
NEO/BTC
I posted this on Thursday and it is still my favorite setup. Price broke a massive inverse head and shoulders and has retested the neckline as support on the last 2 daily candle (green circle). These two candles also made tweezer bottom, which is a sign that price should continue up. That said, if Bitcoin drops, this will likely go with it in the short term. I remain cautiously optimistic on this setup, even if that happens.
XTZ/BTC
When I was hacked, my exchange accounts were frozen and my orders were canceled, causing me to miss my entry on Tezos in the green circle. Now I am looking for a retest of the previous all time high (which likely may never come) for an entry. I have orders sitting in that area. If Bitcoin drops, I could get lucky and fill them.
Regulation Is Coming. Be Prepared.
Click bait, but worth discussing. The trajectory of regulation for Bitcoin and crypto in the United States has been clear for years. First, it was unregulated, and effectively untaxed - it was the Wild West. As interest in crypto grew, so did scrutiny from the government, especially after a string of absurd ICOs. In the past two years, the tax code has become far clearer for crypto traders and investors (and far more unreasonable). To even a casual observer, it should be obvious that more regulation will continue to appear.
Regulation is not necessarily a bad thing - protecting investors from scammers and dishonest exchanges would be a positive. Further, more regulation bring more institutional money, as they will feel more secure investing in the space.
On the flip side, I still view the single largest threat to crypto as being the government. They can never "ban" Bitcoin, but they can certainly make it nearly impossible to convert it to dollars, to trade it or to move it.
It will be interesting to see what the US has in mind for further regulation. One thing is for sure - it's coming.
Bittrex Moved 500M Dollars in Bitcoin - For 1 Dollar
Astounding. How much do you think a bank would charge to move 500 million dollars!? For those who argue that Bitcoin does not have a use case, this is definitive evidence that they are wrong.
The DOGE Cycle
A couple of members have asked me to discuss DOGE and it's famous cycles, so here is a brief primer on the past movement of DOGE.
As you can see, most top to top DOGE cycles are around 30-39 bars, in this case weeks viewing the weekly chart. The first cycle was shorter, and in 2016 this predictor completely failed (big black x). At present, it has been 45 weeks since the last top around 80 sats. This could indicate that the cycle is no longer valid... or that DOGE is due for another massive move up.
There have been two primary areas that DOGE pumps have launched from, represented by the blue lines. Both of these can be considered zones, rather than just single price points. Price is currently ranging between the two of them, usually a sign that it will exit to the upside.
The largest move up was in 2017, topping out at 188. Lucky for me, this was my first, although I exited most of that position between 120-150 sats. Since that time, each move up has been lower - also indicating a potential weakening of the cycle.
You can see how descending resistance lines have played their part in the cycle as well. Major pump, drop down to support, break from descending resistance and pump.
At the moment, the red lines are the key resistance and support that I am watching. If we continue sideways, it will be many more weeks until we see another move up.
The bottom line - DOGE has pumped somewhat predictably since inception, and a trend works until it doesn't! For now, I am expecting to see it happen again - it's figuring out when that is challenging. If it ain't broke, don't try to fix it.
Interview With UToday
I had the opportunity to sit down with UToday and discuss markets, both legacy and crypto and life in general. Give it a quick listen and let me know what you think!
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.