Bitcoin is Consolidating — Will it Break Up or Down?
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I hope that massive plug didn’t scare away any of you, because now we’re going to break into today’s analysis.
Rule number one in asset management: protect your capital
Today I’m going to do something that’s considered a death sentence for anyone who runs a business, but at Alpha Trades we like to keep it honest. If we never share our losses and only showcase our wins, how can we grow as analysts, and what kind of education can we offer to the community?
Yesterday Bitcoin was getting rejected right at the key level of 8875. I opened a short position a little below that level with a target 8675 and a stop set at 8925. The price did come down to the 8800 support that was established on May 3, but on the third touch of that support, Bitcoin printed an inverted hammer and smashed through my stop loss. Luckily, I noticed that price action early and cut the trade for a -0.47% loss.
Once I realized that the price was hitting a strong horizontal resistance level at about 8870 for a third time, it then made sense to flip into a scalp long position with a target of 8978.
I then moved my stop from 8820 to 8900 as the bullish momentum began to weaken, which would protect my position by securing profits. That $30 move isn’t small when you understand how the logic behind this trade can be applied throughout the day as long as there’s enough volatility in the market.
In summary, what you can learn from these two trades is the importance of cutting your losses early and letting your winners run. In the middle of that lesson is another rule of trading — Don’t get stuck in a bias. If the technicals change in favor of flipping your position from one direction to the other, stick to your plan, and follow through with it. In the same vein, take profits often. Letting a position run without abiding by your original take-profit levels is in itself a bias toward price running perpetually in a single direction. Remember, the market is ruthless, only you can protect your positions. My team goes to great lengths to educate the community on trading psychology, and we pride ourselves in doing a stellar job at that.
Bitcoin: Today’s broader perspective
Bitcoin pushed up past the descending trendline channel established from the recent blow-off top at 9480, tested it as support, and then collapsed back inside it. As of 7 AM (CST), that was a bearish sign. What I expect after this failed breakout is for the price to put in a higher low on higher time frames and reach 8970, which is the most recent support-resistance (SR) level, and beyond that is the 9011 SR level. Once we get up to those levels, I’ll open my playbook for shorts.
Alternatively, you could short on the basis of Bitcoin breaking back into the descending trendline mentioned before with a stop loss just above 8920 (mapped using candle wicks on a 15-minute chart), with a profit target of 8800 and 8700. I am not leaning bearish at the moment, as I’m waiting to see if price can put in a higher low (again, this was written at about 7 AM CST. Advantage members have access to intraday analysis).
I entered a EURUSD short a few days ago at 1.0955 with a stop at 1.1023 (indicated by an X on the chart below) and manually closed in profit near 1.0915 as the asset appeared to be reversing, leaving me with a 0.37% profit.
Typically, the forex markets may take months to provide an interesting trade setup, but lately, the market has been volatile due to the COVID crisis and resulting financial crisis.
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