pasojov

BTCUSD - Topping out around 66k?

Short
BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
BTC is yet to fully correct, at least on the weekly. In my eyes, these huge candles up are unsustainable without significant greed. Significant greed cannot continue indefinitely without returning to the mean (neutrality), and likely, significant fear.

There are a few factors I believe will influence a correction:
  • Greed across the traditional and crypto markets. See CNN's sentiment analysis and alternative.me's fear and greed index.
  • Only 5% of institutional financial managers are planning to hold BTC in 2021 ( volatility being cited as the main reason), implying the feverishness of 'mass adoption' is overstated and overhyped.
  • Bitcoin is back in mainstream media. The more exposure it gets, the more FOMO and greed kick in, the more new investors pile in, the more people ready to buy right at the top and add selling pressure on the way down.
  • Big green (or red) candles, while difficult to gauge the top, often result in big moves back down. Similarly, an almost vertical acceleration implies a significant deviation from its mean (anecdotally, the further and quicker something deviates away from its mean, the quicker it comes back). Currently, BTC's yearly EMA is almost exactly the previous ATH of $20k.
  • Simply, a correction is due. It's gone up but hasn't come down much.

So, knowing that a correction is due at some point, we can then try and forecast the top.

While looking for similarities between the last ATH and this current rally, I noticed there was a period of consolidation, followed by a higher low that wicked down (marked on the chart).

Using these points as anchors, the next anchors are the ATH and the last high at $42k. While the intraday levels of these fibs fit nicely, there are 2 extensions that caught my eye on the weekly that fit almost perfectly.

The 1.618 level on the recent fib (grey) and the 3.618 level of the ATH fib (red) both sit around $66.1k and $66.3k respectively. Seeing how well the other levels line up through previous price action gives me confidence these are valid levels. I'll give coordinates at the end of this post so you can see what I mean.

I've also included a 3-factor BB on the chart for confluence. While the weekly close tomorrow will change the upper band, its near-vertical ascent will likely eventually be punctured by price. As denoted by the red circles, a reversal has occurred every time a swing has formed there. Moreover, for an asset to exceed 3 times its weekly standard deviation should ring alarm bells in anyone's ears.

Okay, so we know where the top might be. How can we make a trade based on this? I'll start with where I think it might end up.

If we use $66k as our first anchor and the bottom of the last consolidation at about $3.1k, then the 0.618 level (blue line) lines up perfectly with the most recent fib's 0.618 level on the way up. This falls at $27.5k, or rather, a contraction of 61.8%.

The tricky part is stop loss placement. I'm going to say that a technically invalid level would be past the 3.764 level of the ATH fib at $70k. Anything between $71-72k would likely invalidate this idea.

In summary:
Entry: $65k
Stop: $71-72k
TP: $27.5k, $31k if conservative, $42k if ultra conservative

Let me know what you think and give me a follow for more.

Happy trading!

COORDINATES:
ATH fib = (1) 1830.00, (2) 19666.00
Current fib = (1) 3122.28, (2) 42000.00
TP fib = (1) 66026.19, (2) 3122.28

Comments

Really strong analysis
+2 Reply
pasojov dmas1000
@dmas1000 thanks mate!
+2 Reply
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