So it turns out I’m not good at posting while mobile on part 1 of my summer vacation. My surface tablet just doesn’t cut it. Sorry about the absence of posts. I’ll get some stuff out this weekend and more throughout the week. Next weekend I’ll be off galavanting on another ultimate frisbee tournament so I expect there’s potential to miss a post or two then as well. I’ll do what I can. Anyways, let’s get a bit of charting out there.
I imagine the doom-and-gloom articles were out in full force when I was away while BTC fell down under $30k. At the moment I still don’t anticipate closes under $28k but as I’ve discussed often the weekly close plays a big part in analysis and future price projections. Much of my commentary regarding positions is what I would be doing in non-ideal, hypothetical situations. I have been out of most of my positions, that aren’t forever holds, so much of these posts don’t really reflect my actual actions. Ideally, in my opinion, profits should be taken on the way up when position trading instead of on the backside once you start losing profits, and hopefully, you’ll learn more about how to do that through the newsletter but this post isn’t about that so I’ll get back on topic, why using market structure is bad for take-profit strategies. In the Thursday post, I’ll talk about taking profits.
Above is the weekly chart of BTC, specifically the Bitcoin Liquid Index made by BraveNewCoin. It’s one of the more accurate measures of the liquid spot price across multiple exchanges. I like to use that for my higher timeframe analysis instead of BTC/USD on one particular exchange or BTC against USDT. I’ve been using this image for the Sunday Synopsis posts. I added in a few things. The stars stamped on some of the green bars illustrate when the price closed above a prior market structure resistance, confirmation to look for potential long trades. You can also see in mid-May when BTC finally started breaking down and broke prior support at $45.2k. This past week it did so again closing below $32.2k, confirmation to look for potential short trades. The breaking of market structure is a lagging indication so it’s not ideal for profit taking but if you lack other/better methods of determining trend reversals it can indicate future directionality and serve in this role but you can be really screwed at times and you’ll see why below.
First, consider the period of December 2020 through Late January 2021 on the chart above. If the top had been at $42k and the price DIDN’T rally from $32.2k in late January there’d be no confirmation of broken market structure support until $19k. That’s a loss of over 40% in value and a lot left on the table. Who wants to take profit that way? No one. You’ll end up holding lots of bags.
Let’s get a bit more price action with the current market and see if we can find some further clarity on what could happen and if we can use market structure to signal profit-taking.
Here we are, in the past, on Sunday afternoon and the weekly bar just closed below market structure. This is objectively a bad sign. Basically, it’s saying weekly charts could be printing lower lows in the near future. Do we panic and exit positions waiting for lower lows? Maybe not. Let’s rationalize.
One of the reasons I would not be too concerned about the close below the weekly low close is the price is still yet to close below the lowest daily close at $30425. That is one of the last lifelines BTC has got I would think.
Also, let’s toss in the RSI. It is in bearish territory under the midline and is respecting the descending trendline from all the way back in January but it’s also printing a new ascending trendline. As those trendlines get closer to converging they will likely match price action in volatility. A daily close below $30.4k and broken down RSI would be a reason to think sub $28k is in play and positions should be bailed on. Alternatively, a breakout of the RSI would be a really big step in the positive direction as this is a multiple-month trend and would likely lead to prices testing $39k so bags should be held.
Let’s fast forward some.
Well…
Shit...
That’s a new weekly low close. That’s a new daily low close. That’s a breakdown of the ascending trendline on RSI.
Those are all very bearish signals, yet if used to exit a position now it looks like you may have sold out at the bottom as the RSI broke out from the months-long descending trendline AND above the midline right after.
This can happen time and time again. Market structure support and resistances are great for determining bias and trend identification. If used for exiting positions be prepared for being wrong at times and late for moves.
A couple more fun charts for the road. Below we have the BTC daily chart. We’ve got 3 exponential moving averages, from thinnest to thickest, 50-Day EMA, 200-Day EMA, and 50-Week EMA. It’s got some horizontal support lines. It’s got volume. It’s got the RSI with adaptive bands instead of the traditional 70/30 lines (I’ll talk more on that later). The takeaway from this is the testing/hold of the $30.4k support and testing of the 50-Week EMA resistance and soon after the 50-Day EMA just above it, though if that 50-Week EMA is flipped I think over the next few days we’ll still see some bullish price action up to the 200-Day EMA as it will also be a break of the months-long RSI descending trendline and adaptive top band.
And here’s this darn chart again. All is still the same. Can getting kicked down the road still. No big moves to make yet. Still rangebound. If the 50-Day EMA holds as resistance around $35k I’d be watching for prices back to at least $31k - $32k.
Have a great evening. See you in the Sunday Synopsis tomorrow. This week it’ll be for all subscribers.
@theprivacysmurf