The Wolf Den #9 - Bitcoin At Resistance And More
BTC Analysis
Bitcoin looks bullish. Price has finally revisited the top of the multiple month trading range and still looks likely to rise. That said, price is currently AT RESISTANCE. Rationally, buying at resistance is a bad idea. This is a good time to watch and wait - the better entries were below and the safer entries now are likely above.
MONTHLY CHART
$7,777. I have been repeating this number like a mantra for months. This is the key level on the monthly chart and price has currently broken back above. That said, it is VERY early in the month, so we will need to check back when the candle closes. Bulls want to see a strong close above this line and then for price to hold it as support.
WEEKLY CHART
We have discussed the weekly bullish divergence with Stochastic RSI ad nauseam, so I will spare you - you can look back at all of the other newsletters for my thoughts. What is significant now on the weekly chart is that price is currently above the EQ (huge dashed red line) of the channel. It is early in the week, but if the candle closes anything like this, we should expect a move to the top, consolidation and then a break of the channel altogether. Hopium indeed, but that's what the chart is showing to be likely.
DAILY CHART
Price has finally reached the top of the trading range that it has been in for well over a month. The reaction to this area will largely determine the course of Bitcoin for the foreseeable future. As you know, I was long in the lower red circle on the wick below the trading range (bullish SFP). Here is the Twitter thread I shared at the time.
I am still long in a new position from $7,350, but am watching closely to see if this daily candle can manage a close above the blue range. If not, we will have a bearish SFP (a wick above the previous swing high) which could be a bearish signal. At this point, I want to see candles closing above the range and retesting it as support. If that happens, sky is the limit.
Speaking of ranges, price has currently reentered a previous trading range (red). Holding the bottom of this range should lead to a move to at least the EQ (midline, around $8250).
The inverse head and shoulders that I shared as an early possibility has confirmed with the break of the pink neckline. Awesome. This is a bullish reversal pattern. We often see a retest of the neckline as support (as drawn above) before a continued move up. This does NOT HAVE TO HAPPEN. The target (pattern targets rarely hit, let's be honest) is around $9,000, based on the depth of the neckline to the head.
4 HOUR CHART
I bought Bitcoin again (trading stack, I am always mostly in BTC long term) at $7,350 when I noticed this hidden bullish divergence with RSI on the 4 hour chart. This is a signal of likely continuation up. Further, it occurred right at a key support level, the purple line. RSI is currently overbought, so I am watching for either sideways movement or a slight retrace to reset RSI a bit.
South Korea Will Tax Crypto
South Korea will not tax individual crypto profits yet, but legislation is in the works
Nothing surprising here! At present, it is legally impossible for South Korea to tax traders on their crypto profits - quite a boon for crypto enthusiasts in that country. However, that is clearly going to change and South Korea is taking steps to rewrite the legislation to allow for taxation. I would imagine that most countries will slowly follow suit. The United States certainly went from tax friendly to being one of the most aggressive for crypto taxation in the past 2 years.
Altcoin Trades
There is a pattern that we have seen a number of times in the past - large cap altcoins like ETH, XRP and LTC rise markedly against BTC right before a major BTC move. Yesterday was no exception. I was able to close XRP, ADA and ETH positions at resistance for a nice profit, right before the Bitcoin jump.
That said, I sent the above tweet right after closing these trades. When Bitcoin looks this bullish (or when it makes a large bearish move), it is likely time to take profit on alt trades and get out of the way. This could be one of those times when it's best to be sitting in Bitcoin and not trading alts heavily. I am personally waiting to see what happens with Bitcoin. For that reason, this issue will be light on altcoin trades. There's no reason to push trades in an uncertain market.
For reference, here is the XRP chart. As you can see, price pumped heavily right into a key level of resistance, showed a hidden bear div and dropped aggressively. There was no need to be greedy on this trade. To me it was a clear spot to take a quick and healthy profit.
I stopped out of FUN at 43 sats for a 1 sat loss when it broke down from the ascending channel. As I often mention, I like trades with an ascending channel because I can move my stop up with price. This allowed me to stop out with a minimal loss.
I stopped out of FUEL dead even using the same thinking as FUN. Once price broke back below the blue line, I exited. No harm no foul.
MANA hit the target shared in Thursday's newsletter, for roughly 20% profit.
ENG/BTC - 1/6 ENTRY
This is the only new alt trade that I am in. I was slightly late on this entry as it was not a coin that I was watching until yesterday. Price bounced perfectly at 5087 sats, a key level of resistance turned to support. This is also near the bottom of the ascending channel that price seems to be traveling in. Stop loss below the ascending channel and horizontal line mentioned. The target is the recent highs at the top line.
THETA/BTC
This is on my radar, but I have not decided to enter as of yet because of Bitcoin's movement. I like the break of the blue line and retest and that price is trading in the top half of the trading range. If Bitcoin stabilizes, I may take an entry in this area. Worth watching.
Plan Your Losses
Have you ever bought a lottery ticket and sat around dreaming of all of the things you will do when you win? While this is a fun exercise, many investors and traders, particularly in crypto, view the market in the same manner. They buy a coin and think about the 100X that it is likely to pull. They start dreaming of quitting their job and buying a Lambo.
For traders, the attitude described above is dangerous and unhealthy. I approach every single trade I make based on the assumption that I am wrong. Rather than planning for a win, I always plan for a loss. This serves me in a few ways. First, when you are planning to lose, it forces you to look for the best entry possible, one that is close to invalidation and justifies a tight stop loss. Second, when you plan to be wrong you trade defensively, looking to lose as little as possible. This helps to eliminate greed from your thinking and allows you to view the trade realistically. Remember - the first rule of trading is to protect your capital. "The best offense is a good defense." Or better yet...
What Is An STO?
Written by my friend @StackingUSD.
An Introduction to Security Token Offerings - The Push Towards Regulation
We can attribute several different external factors to the bull run of 2017. One factor was the era of ICOs, Initial Coin Offerings. An Initial Coin Offering (ICO) is the funding of a project or venture by raising small amounts of money from a large number of people, typically through the Internet for cryptocurrency projects. The founders of these cryptocurrencies receive funds from investors to develop the project, in exchange for tokens at a later date. ICOs are an unregulated fundraising method where projects can sell their tokens in exchange for Bitcoin, Ethereum and/or fiat. With many ICOs facing legal scrutiny for many reasons now in 2019 and 2020, more pro-regulation projects, companies and entities (offered though security tokens, like BitOrb) are turning to new, government-friendly ways of funding and launching a token in a regulated environment that is valuable to both the company and investors.
STOs vs ICOs
There are a couple of important key components to understand. STOs are tokenized crowdfunding. Early inventors are granted tokens as representation of their equity in the company. Additionally, STOs are also regulatory compliant in the appropriate jurisdictions, as opposed to ICOs that are easy to set up and that do not often abide with the appropriate regulatory entities. STOs give traditional companies a potentially exciting outlet to migrate over to tokenization and the blockchain. STOs offer a large opportunity for investors across the spectrum. Something to consider when involving cryptocurrency or tokens in investing is the drastic reduction in fees when compared to other traditional assets or means of investing. STOs are beginning to look like a new outlet of capital raising in this space.
With all this being said, it is logical to assume that projects will gravitate towards crypto crowdfunding with Security Token Offerings due to the nature of the regulatory scrutiny and lawsuits surrounding ICOS from 2017 and 2018. The general idea of having an investment vehicle that is a regulated token is exciting for a lot of VCs, hedge funds and retail investors. The emergence of STOs throughout 2019 will undoubtedly have a large impact on the crypto markets. Security Token Offerings are the new horizon for legitimized crowdfunding investments in digital assets. As blockchain technology and cryptocurrency projects continue to grow and face mass adoption, STOs will begin to appear as the new standard in the cryptocurrency space.
Read more HERE;
The FED Continues Repo
While you were sleeping last night, the FED threw a cool 76.9 billion dollars into the market. I am honestly dumbfounded at these continued repo moves, as employment, growth, stock prices and other lead indicators continue to flash positive. If the market is so healthy, why does the FED continue to prop it up with injections of USD? Nobody has a clear answer for this, which makes me very nervous about the continued market rise, commonly being viewed as a "melt up."
As Reuters reported only yesterday, the FED is supposed to be working on an exit strategy for repo, which does not gel with the new infusion last night. Something strange is afoot.
My gut instinct (this is not fact, just a theory) is that there has been so much controversy over the FED reducing interest rates, that this is perhaps a more palatable strategy for achieving the same goal. Fed rate changes shake global markets - even the mention of a rate change or the usage of the wrong word in a FED address can send markets into turmoil. To me, injecting money directly into the market is a far more subtle way to keep the market humming without the publicity. I would love to hear any other thoughts on the matter, as no pundit or analyst can seem to get a grasp on what is going on.
Tesla Trade
I have made 2.5x my money since May trading Tesla. No leverage, no options, nothing fancy. I simply bought a stock I believe in and had the confidence to hold. I am presently starting to sell the position. The series of tweets below outlines the trade.
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.