Hi traders, let's talk about Bitcoin.

Bitcoin.

• The weekly picture shows the price of Bitcoin forming a massive bearish divergence...

• But divergence can take a while to play out and generally signal an exhaustion of a trend only when they hit the over bought zone which is not yet the case but something to keep in mind when position sizing on any of your trades:

• On the daily time-frame things look a little more nuanced, Bitcoin has been consolidating into a tight range for over two weeks now:

• And the market could really go two ways, which I've mapped out for you:

Strategy:

• Bitcoin bounce plus subsequent consolidation has greatly benefited altcoins which have been making strong moves since April. While some altcoins like EOS have been taking off nearly 400%, Bitcoin has only been able to produce an apathetic 50% move which isn't exactly compelling for a trader. If Bitcoin is definitely not the play right now, it could very well be soon;

• If the Bitcoin bull scenario plays out, my plan is to enter a position after the initial break of $10 and a successful retest of the same level for support (as shown in the chart above). Bitcoin breaking 10k would surely attract a lot of media attention and headlines and thus more money into the space which would also benefit altcoins while Bitcoin chews through the next market zone between $10k and $12k. If Bitcoin starts consolidating above $10k the same way it has consolidated above $9k and we see an influx of new money in the space then I think that would create the conditions for a full blown altcoin summer. My bet is the new money would probably invest in Bitcoin first then gravitate towards cheap top 20 altcoins like ADA as altcoin markets start moving and gain in value;

• On the flip side, if the Bitcoin bear scenario plays out and we start breaking below $9k, we would then be forming a lower high on the bigger time-frame which would probably lead us to ultimately retest $6.5k after a temporary stop at $8k. At this point, my guess is that it'd be unlikely that $6.5 would hold and I'd be looking at lower areas for a dip buy;

• For all the reasons above, I would still recommend that you size your positions carefully to protect you against the risk of a drop, be aware that $9k per Bitcoin is probably still very much overvalued and that there is no guarantee that the market has really come back into bull mode until we clearly break above $10k and stay there for at least a few days. Until then, I am keeping 50% of my trading capital in cash, ready to catch the bigger moves and to adapt my strategy regardless of what the market decides to throw at me.

Trade safe in the jungle!

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