The Wolf Den #264 - Trading Psychology
Bitcoin Thoughts And Analysis
DAILY CHART
I have not used MAs in my trading in quite a while, but they seem to be the talk of the town with the potential death cross. I like to watch what everyone else is watching, hence my renewed focus on MAs. Many have been discussing the cross down of the 50 MA through the 200 MA, which is a "bearish" signal. Any time a shorter time frame moving average crosses down through a longer one, it is a "death cross." That said, different people use different MAs and depending on those you choose, there's almost always a death cross somewhere. Also, MAs are lagging indicators - a result of previous price action. The 50 MA is dropping because of the previous drop in price.
Either way, the cross may not even happen. If price stays here or rises, the 50 MA is likely to turn up and avoid this signal.
We can see that the 200 MA is currently a tough nut to crack - the last two daily candles have thus far been rejected there. Both of these MAs are in the area of the key level at 42K that I have been discussing, so there's a LOT of resistance in this area. A clean break through this zone on volume would be the only real signal that bullishness has returned. For now, I am seeing a lot of euphoria at resistance, which is somewhat normal in any market. Proceed with caution and get excited if we break through - not before.
The price action has been encouraging, but we have no confirmation yet. Maybe Saylor can push us through.
4-HOUR CHART
You can see that price has once again attacked the key blue supply zone and seems to be holding there nicely for the moment. The 200 MA on the 4 hour is acting as support for the moment, as price consolidates in this area. If you were on the live stream yesterday, I drew the little blue demand zone below price that has acted as support beautifully for the moment.
I like that price is holding strong around 40K for now, which makes it appear to be consolidation below resistance - that usually leads to an attempted push through. The longer we hold this area the better, and I would love to see a clear flag or pennant form.
Things looks good at the moment for an attempt at 42K, but too early to tell.
Altcoin Charts
MATIC/USDT
Polygon (MATIC) has outperformed the market throughout both the bull run and correction, so it is always wise to watch this coin. There is no trade here yet, but it has setup with a perfect symmetrical triangle and gives an obvious trade opportunity on a break in either direction. A break of support would be a sell or short signal and a break of descending resistance would be a clear buy signal with targets above the recent highs.
You can see that this has alternating touches up, down, up and down, which confirms the pattern. We also have decreasing volume throughout the triangle, which is normal for consolidation before a break out.
For educational purposes, there are a number of ways to ascertain potential targets on a setup like this. First, if you believe that this is a bull pennant (it's too big for my liking to qualify), then you measure the length of the flagpole in blue. When price breaks out, you pull this blue area to the break out and measure up to find the target.
Many use the depth of the triangle to determine the target, which would be the idea in red. You also measure this from the breakout.
Finally, many believe that the target should be determined by pulling the support line and drawing a parallel line from the top of the pattern. You can see that this offers the highest target.
There are many ways to skin a cat.
Regardless, set an alarm on the descending line and enter on a break or retest if you are looking to trade this.
Legacy Markets
AAPL (APPLE)
This is an update on a trade from last week.
As discussed was likely, this has bounced beautifully from ascending support and should be targeting the highs at $145.09. The safest trade here is actually a break of $145.09 as resistance and retest as support, as that would send Apple into price discovery once again. Still, this is a really nice opportunity, assuming tech stocks continue to outperform and the market continues to rise.
I view Apple as more of an investment and hold the stock, but this is a chance to trade it as well. You should already be in profit, with stops below ascending support and the 50 MA.
What Is The Fear And Greed Index?
We often hear that emotion drives financial markets, with a focus on fear and greed. Luckily, we have tools that can alert us to when Fear and Greed are most rampant and when we are leaning in either direction. Here is a quick primer on the Fear and Greed Index and how it is comprised and utilized.
Institutional Interest In Ethereum
Goldman Sachs Group Inc. is moving beyond the world of Bitcoin and expanding into Ether.
The ability to trade crypto derivatives through major legacy institutions beyond Bitcoin has been limited, but Ethereum is now following in the footsteps of Bitcoin and slowly gaining recognition as a legitimate digital asset. Goldman Sachs has announced that they intend to offer Ethereum options and futures trading in the coming months.
Mathew McDermott, the head of digital assets at Goldman said the following in an interview regarding the announcement, “we’ve actually seen a lot of interest from clients who are eager to trade as they find these levels as a slightly more palatable entry point. We see it as a cleansing exercise to reduce some of the leverage and the excess in the system, especially from a retail perspective.”
The CME will be a major competitor, as they already offer Bitcoin and Ethereum products along with micro contracts. The good news for investors is that the competition will force the two institutions to innovate or fall behind. During Bitcoin’s last price climb, the CME faced a problem where a single contract was worth upwards of $300,000, forcing them to offer micro contracts worth .1 BTC instead of 5.
What other asset in the world can be broken down as easily as Bitcoin and divided into smaller contracts? There is no commodity, equity, or bond in the world with the liquidity and fractionalization of crypto. I expect interest in Goldman’s new Ethereum product to be quite large and boost the price as the market turns around.
The SEC Has Postponed Crypto Regulation
The SEC’s Spring agenda was released, which announced their short and long-term regulatory actions. There was no mention of cryptocurrencies, blockchain, or Bitcoin. It is a little surprising to not see any mention of digital assets on their current to-do list. Gary Gensler, the SEC Chairman, is a blockchain specialist and often talks about cryptocurrencies, and we have seen increased scrutiny from politicians like Elizabeth Warren.
The SEC’s absence might lend enough time for the bull market to continue as expected without impending regulations. In the agenda, there was mention of “short sale disclosure,” probably alluding to the meme stock short squeezes we have been seeing across legacy markets. If the SEC wants to get tied up in that mess and let us continue working towards global adoption, that is absolutely okay. That being said the SEC will return eventually.
MicroStrategy Is A Bitcoin Acquisition Company
By now it has become clear that purchasing shares of $MSTR is akin to indirectly holding Bitcoin, but with increased risk and volatility. The same day that they closed a junk bond round of 500M, Saylor has now announced he is selling shares of his company to purchase more Bitcoin - 1B worth. He is gutting his company from the inside out to acquire more Bitcoin.
Critics have rightfully pointed out that with each step towards Bitcoin Saylor takes, his chances of defaulting increases on the bonds and debt. Also, worth noting is that Saylor will continue to compare the value of $MSTR to Bitcoin and will sell stock when it trades at a premium to Bitcoin. Michael Saylor will either be a hero or zero - there is no in-between left.
The Wolf Of All Streets Podcast Ft. Denise Shull
THIS EPISODE WILL BE ON YOUTUBE AT 10 AM EST HERE
From athletes to hedge fund managers, professionals from every walk of life around the world have sought expert advice from Denise Shull. Following years of successful trading, Denise transitioned into a renowned performance and decision coach for determined minds looking to gain an edge on the competition and mitigate risk. In addition to her one-of-a-kind Shull Method, Denise also offers unique insight into the minds and emotions of crypto traders and investors, a perspective unseen by many of us. Perhaps most notably, the famous TV character "Wendy Rhoades" from the show "Billions" is based on Denise.
In this episode Denise Shull explores:
Traders underperforming the market
The 80/20 investing rule
Psychoanalysis of trading
Managing your money vs. others’ money
The Shull Method
Countertrading the herd
Intrinsic value and human perception
Paralysis by analysis
Athletes vs. traders
The game of the market
Traits of a good trader
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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. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.