Nasdaq Bull Trap Study
Zaktualizowano
Introduction
I lost a lot of money when I began trading in 2018, and truth be told I have not made it all back yet. For years I blew up accounts not being able to recognize bull traps and properly set my stop losses (or take profits) and I engaged in a lot of capital destruction. As such I have spent a lot of time trying to make sure I don’t destroy more of my capital in trading another bull trap. The real question for myself is “Have I become vigilant (seeing what is there), or hyper-vigilant (seeing what is not there).
Analysis
This is a simple application of support and resistance. What was support flips and becomes resistance. But, because we suspect there may be a bull trap we are looking for a potential fake out. So the resistance may look like it is going to fail.
In this case the star indicator is the gaussian channel. We are looking for it to act as support and then flip to resistance. But as the gaussian channel flips to resistance it might look like it will fail and the bullish trend will continue.
That is what we see on our main chart. Price has popped out of a red gaussian channel and so some people may be bullish and expect continued upside. They may be doing fib extensions to the upside as part of their targeting.
For this idea, the Keltner channels is along for the ride. Price pushed the Keltner channel up for the impulse and now I expect to see the top of the kelter acting as resistance on the way down.
Due to the speed of the moves we can see the same thing happening in the 2017-2018 topping formation for bitcoin on Ethereum, but this time on the daily charts.
Eth Example Two bull traps
The main chart is on the weekly timeframe but we are looking at Eth and Bitcoin on the daily. With this set up the Gaussian channel was able to turn green again, once again selling the bull trap. The indicator was green and for the past several years that was suggesting continuation to the upside. But price broke down and the channels acted as resistance until ETH met a major target at the 1.618 extension.
Bitcoin Example of Two bull traps
In the case of Bitcoin with the first bull trap we set up a longer-term consolidation pattern that had people calling for saucer reversals, cup and handles, etc. Signs of green we seen as potential for more upside while more experienced traders were calling for more downside.
Topping in select Equities
Amazon
Tesla
Microsoft
Lulu
Meta (might actually have some more upside potential
Final Thoughts & what I am doing
The equities markets move relatively slow compared to crypto and if bitcoin was able to create a long consolidation structure (ascending triangle) it is not beyond reason to think that the NASDAQ or other indexes cannot either. Bear market rallies are often hard to predict and lead to lots of shorter/options traders loosing money because they did not close their shorts in the money.
I am biased short in the short term. I have one long that I think will be profitable but when that has reached a target I am only shorting. I don’t want to deal with the complexities of having both longs and shorts. It can really hurt your head.
My main trade is merely holding my MATIC short until it hits the monthly SAR.
Somehow Bitcoin, despite all of the negativity, looks to be in the early stages of a bull market.
Maybe we will see bitcoin steal some money away from the Nasdaq rather than having both plunge.
I lost a lot of money when I began trading in 2018, and truth be told I have not made it all back yet. For years I blew up accounts not being able to recognize bull traps and properly set my stop losses (or take profits) and I engaged in a lot of capital destruction. As such I have spent a lot of time trying to make sure I don’t destroy more of my capital in trading another bull trap. The real question for myself is “Have I become vigilant (seeing what is there), or hyper-vigilant (seeing what is not there).
Analysis
This is a simple application of support and resistance. What was support flips and becomes resistance. But, because we suspect there may be a bull trap we are looking for a potential fake out. So the resistance may look like it is going to fail.
In this case the star indicator is the gaussian channel. We are looking for it to act as support and then flip to resistance. But as the gaussian channel flips to resistance it might look like it will fail and the bullish trend will continue.
That is what we see on our main chart. Price has popped out of a red gaussian channel and so some people may be bullish and expect continued upside. They may be doing fib extensions to the upside as part of their targeting.
For this idea, the Keltner channels is along for the ride. Price pushed the Keltner channel up for the impulse and now I expect to see the top of the kelter acting as resistance on the way down.
Due to the speed of the moves we can see the same thing happening in the 2017-2018 topping formation for bitcoin on Ethereum, but this time on the daily charts.
Eth Example Two bull traps
The main chart is on the weekly timeframe but we are looking at Eth and Bitcoin on the daily. With this set up the Gaussian channel was able to turn green again, once again selling the bull trap. The indicator was green and for the past several years that was suggesting continuation to the upside. But price broke down and the channels acted as resistance until ETH met a major target at the 1.618 extension.
Bitcoin Example of Two bull traps
In the case of Bitcoin with the first bull trap we set up a longer-term consolidation pattern that had people calling for saucer reversals, cup and handles, etc. Signs of green we seen as potential for more upside while more experienced traders were calling for more downside.
Topping in select Equities
Amazon
Tesla
Microsoft
Lulu
Meta (might actually have some more upside potential
Final Thoughts & what I am doing
The equities markets move relatively slow compared to crypto and if bitcoin was able to create a long consolidation structure (ascending triangle) it is not beyond reason to think that the NASDAQ or other indexes cannot either. Bear market rallies are often hard to predict and lead to lots of shorter/options traders loosing money because they did not close their shorts in the money.
I am biased short in the short term. I have one long that I think will be profitable but when that has reached a target I am only shorting. I don’t want to deal with the complexities of having both longs and shorts. It can really hurt your head.
My main trade is merely holding my MATIC short until it hits the monthly SAR.
Somehow Bitcoin, despite all of the negativity, looks to be in the early stages of a bull market.
Maybe we will see bitcoin steal some money away from the Nasdaq rather than having both plunge.
Uwaga
To be clear I do not have a trade on NDX or some derivative. I am using this as way to measure the broader market. If NDX is bearish I can assume bitcoin is bearish. If bitcoin is bearish I continue to hold my matic short (and take the decreased value of what I have decided to hold). If I was to short NDX based on this idea it would look something like this.
Zoomed in for a daily entry:
Uwaga
Time for shorts/puts or inverse ETFs seems to be upon us (or me, specifically). I am moving some money around to try and take advantage of this downward move I see.Uwaga
This looks like a double top really bad to me. The quick move is probably a 9% draw down.
The chart below remains a long term expectation but the timing is always the hardest thing to get right.
Uwaga
More evidence that this top is occurring for purely technical reasons is this fib extension draw. Taking the low after the dotcom bubble pop to the local high before the Great Financial Crisis to the swing low gives us the current high. A lot of profit taking occurred right at the 2.618 level.Price action settling on the previous dotcom high seems very likely over the next couple of years.
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