Bitcoin: Watch Reversal Confirmation 56K.

1 wrz

Bitcoin broke 60K but is showing signs of buying activity in the form of pin bars just above the 56K major support (see arrow). This retrace should come as no surprise if you read my previous article where I anticipated this scenario a week earlier. While current momentum is still bearish, this market is in a consolidation on this time frame which means the support/resistance levels are where the opportunities are more likely to develop. This means the 56K area is a key level where a high probability and high potential bullish reversal can appear over the coming week.

Now just because a reversal can be anticipated does NOT mean to jump in early which is a very common mistake. Confirmation IS the key to mitigating risk and aligning with the probabilities. If price does NOT confirm a reversal, it will then be "saying" that IT wants to continue the bearish momentum which can lead to a test of the 53 to 50K support. Again this is NOT about what you or I "think", its all about what the MARKET demonstrates through price action.

What does confirmation look like? On this time frame, a pin bar or inside bar followed by the break of the high of that bar. At this time, IF the current candle closes in the form of a pin bar and takes out the 59K high, we can argue a new buy signal is in effect. The thing is, a trade idea is NOT just a buy signal, it must also consider the accompanying RISK. Using this method, the candle low is one point of reference for risk which can be any where from 2 to 3K points (on this time frame). Once you figure out the risk, you can then calculate a profit objective or you can reference the next resistance level around 64 to 66K area.

Not everyone has the same tolerance for risk. Only you can determine how much risk is appropriate. This is where smaller time frames offer more flexibility. For example, if 2 to 3K+ points of risk is too much, you can consider a smaller time frame such as a 4 hour or 1 hour. Your profit objectives will be proportionally lower but so will your risk. If price reaches 56K (blue box) and confirmations appear on a 4H or lower time frame, you can enter with more confidence because your risk will likely be in the 1K range while your probability of a positive outcome will be much greater (56K is a historical location).

You can calculate all of these factors yourself or use a tool (like my Trade Scanner Pro). Before you even get to that point, you must first know what you are looking for (anticipate). As I tell my followers there are two types of trades: continuations and reversals. An example of a continuation is when a break out occurs, while a reversal is when a support/resistance level holds. Considering components like trend and support/resistance levels in relation to each other (context) is how you can formulate your anticipated idea BEFORE expecting a confirmation. Without this important step, you are essentially playing a RANDOM game.

With this in mind, for the coming week I am anticipating a REVERSAL around the 56K area. IF price confirms sooner, that is okay too, but the question becomes how does this change the risk. Also it is important to remember that we are still in holiday mode which means movements can be muted and erratic. If you are going to play, be selective and specific while keeping risk tightly controlled. Careful attention to smaller time frames can help in this area.
Listen to the market, it is ALWAYS right.

Thank you for considering my analysis and perspective.