BTC Market Watch 7/13/18 - Keep a cool head and trade your plan.

I constantly look for the footprints of market makers pushing prices around at a whim. When others blame big money they fail to realize that they are just part of an eco system just like you and me. Saying you can't trade in an environment where big money pushes prices around is like blaming the hawk for picking up a mouse. With that being said, people I talk to have stated that our recent bullish move is market makers pushing prices around to catch people in a trap. "It's impossible to trade this chop". While I don't disagree, people must realize that there are hawks competing with each other as well. If you were caught in this bullish move on a short position then a few lessons to be learned here.

1. Scale positions in slowly.
2. Keep an eye on short time frames as well as long time frames.
3. Always watch volume.
4. If you are a momentum trader, it is especially important to use stop losses.
5. Don't panic. Just because a trade is in the negative on a planned trade, doesn't make you stupid or wrong. Scaling in can be better than closing out a position under the water.
6. Trust your original trade plan. Once you enter a trade, you lose the ability to think rationally. Decide everything before you enter the trade. Both the entry and the exit.

Ok, pep talk over. Time to talk about this dramatic move up in price we had a little while ago.

Here is the move that was causing a fuss with some of my friends. As you can see, there was a substantial move up. It did not appear there was any reason for the price to move this direction and looks like market manipulation right? After all, the RSI had cooled off, low volume, not at the 6k support level, structure broken and many other bearish indicators.

The secret to seeing this coming comes with volume. Yesterday I posted an article showing how all the signs were pointing down, but there was a chance for a bullish bounce to 6.3k. Here is the screenshot from yesterday.

These yellow lines with circles represent locations from various points in the past where price WOULD be if there was NO, price/volume divergence.

Now I am not the all-mighty trader or anything, I got stuck underwater in a short position on this one too. The silver lining is that I did not take a full position and I am now able to increase my position size and take a larger short position. I agree that there was a VAST majority of signs that continued to point to the down direction, but this doesn't mean close all your positions and take a loss.

The chart is still, VERY bearish. This bullish move is a very short term correction that longer term trends will surly correct. If you read the article I wrote yesterday, I pointed out a few reasons why the price is overvalued and why we should see a continuation of the downtrend.

Here you can see that once the bullish move was completed, it is considered overbought from before the last major leg down, and oversold after the leg down. This means the price was primed to go back to the middle somewhere. However, this is a short term trend that I would never attempt to trade. These divergences can become wider, and it is difficult to decide when the market will decide the divergence is too great and actually make a correction. The solution here is to recognize that the price COULD correct, hence the yellow circle that showed a correction to 6.3k earlier in this article. This is that correction. A short term correction in price to satisfy the price/volume divergence on a short term time scale.

This isn't even it either. 6263 was the highest close, with a wick up to 6283. The correction calls for a correction to 6.3k, so there is room for the price to slant in the up direction while maintaining the downward trend.

Notice how the bulls are not showing interest in following through this move.

Could they? Perhaps. 6.3k is the correction I have taken into consideration while making my trading strat, and the price has not yet reached it. If it did, I would yet again be increasing my short position. 6.4k I would be taking a substantially larger position yet again, however I don't currently expect the price to go there with what I currently see. Yesterday I wrote about the beginning of a VERY slight uptrend. I do think we are there, but like I said yesterday, we are overbought in the uptrend, and need to go down some more.

If we take ONLY volume divergence trend correction into consideration, I find this:

Red 3 lines - Lower upper and mean bearish correction trend line.
Green 3 lines - Lower upper and mean short term bullish correction trend line.
Yellow 3 lines - Overall trend of both.

This chart indeed shows that we are at an interesting point in the chart where we are deciding which trend we want to respect. Personally, I think that we are only bouncing because it was oversold compared to the bullish moves we recently went though, but the larger yellow trend lines suggest we have a long way to go down before we truly find support.

Here is a basic look at just market structure.

As you can see, this bullish move does not change the lower time frame trend out of a lower high, lower low pattern. This doesn't say too much though because there is just so much going on that I don't take this structure very seriously.

This is my personal current feeling about how price action will play out:

In conclusion, I see the possibility for us to attempt an uptrend, but I suspect it will ultimately fail with a continuation of the downtrend.

Thanks for reading,

-Icee-

Please leave me an upvote and remember this is not trading advice.