Part of trading well is having the ability to hold two opposing ideas in your head simultaneously. This doesn't mean you have to be completely unbiased, but it does mean you have to be comfortable with discovering possibilities that don't feel good. Generally, if an idea feels good, you shouldn't trust it. If you only seek out analysts and their analyses that confirm your bias, and ignore the ones that oppose it, you're likely trading emotionally, and are violating Lesson 1 from my previous post by not holding your biases lightly.
Only after applying this perspective can we begin to think more about the Bitcoin scenario that doesn't feel good. What if we don't form the right shoulder and simply continue to the downside? Why would this happen? What did we miss? What will analysts' new charts show after-the-fact? Here I give you their chart before-the-fact with The Ghost Shoulder.
The Bruce Willis Scenario
Like a twist out of an M. Night Shyamalan movie: what if we already formed the right shoulder? What if the shoulder already hit the neckline and was already rejected? What if we are right in the middle of falling from this rejection? I have updated my chart to include this Ghost Shoulder. It's something we need to take seriously, however uncomfortable.
PRO Indicators are giving us some confirmation of this scenario, but are also giving us some rays of hope. PRO Momentum is clearly bullish. On the 2H, we are bullish divergent, bullish oversold, and now we have produced a bullish taking profit pattern. However, the prices are simply not confirming these signals. PRO Momentum is clearly not reliable on its own. PRO Sinewave, the more important indicator if you had to choose just one, is bearish, and the prices are confirming its signals. It found a bearish taking profit pattern at the H&S neckline, producing a strong bearish signal on the daily chart, and on the 2H chart we now see another disturbing signal: the bullish cycle line support now sits at our lowest low of $5,760. For this to signal to be invalidated, we need a new sinewave signal, and soon.
Goldilocks Prices
In my previous post, Lesson 2 taught us not to choose the ideal entry and exit when it comes to Bitcoin. If this is still an Inverse Head & Shoulders reversal, that gave us three potential bullish entries to form the bottom of the right shoulder. The most aggressive, $6,260, the higher right shoulder reversal. The less aggressive, $6,160, the almost symmetrical right shoulder reversal. And the least aggressive, $6,000, the dangerous lower right shoulder reversal. Lesson 3 also taught us to ignore the word on the street, so $6,000 should be ruled out. That leaves us the most likely price to find a bottom, our current price, $6,160. Not too aggressive, not too ideal. However, there hasn't been the bounce yet that one would expect from our perspective, which opens the door to The Bruce Willis Scenario.
It could be the case that the prevailing forecasts of a $6,000 defense are correct, but it's the last possible price area to create a higher low and a right shoulder. Remembering that we don't get to pick the bottom, we have to let the bottom pick itself, I've decided to keep my position open until breakeven, at $5,900. Dropping below $6,120 will invalidate a reliable Inverse Head & Shoulder, according to the scenario in my previous post, but just as we should ignore ideal prices, we should ignore ideal patterns. But let this post be a wake-up call to everyone: there still could be more downside to come.
Only after applying this perspective can we begin to think more about the Bitcoin scenario that doesn't feel good. What if we don't form the right shoulder and simply continue to the downside? Why would this happen? What did we miss? What will analysts' new charts show after-the-fact? Here I give you their chart before-the-fact with The Ghost Shoulder.
The Bruce Willis Scenario
Like a twist out of an M. Night Shyamalan movie: what if we already formed the right shoulder? What if the shoulder already hit the neckline and was already rejected? What if we are right in the middle of falling from this rejection? I have updated my chart to include this Ghost Shoulder. It's something we need to take seriously, however uncomfortable.
PRO Indicators are giving us some confirmation of this scenario, but are also giving us some rays of hope. PRO Momentum is clearly bullish. On the 2H, we are bullish divergent, bullish oversold, and now we have produced a bullish taking profit pattern. However, the prices are simply not confirming these signals. PRO Momentum is clearly not reliable on its own. PRO Sinewave, the more important indicator if you had to choose just one, is bearish, and the prices are confirming its signals. It found a bearish taking profit pattern at the H&S neckline, producing a strong bearish signal on the daily chart, and on the 2H chart we now see another disturbing signal: the bullish cycle line support now sits at our lowest low of $5,760. For this to signal to be invalidated, we need a new sinewave signal, and soon.
Goldilocks Prices
In my previous post, Lesson 2 taught us not to choose the ideal entry and exit when it comes to Bitcoin. If this is still an Inverse Head & Shoulders reversal, that gave us three potential bullish entries to form the bottom of the right shoulder. The most aggressive, $6,260, the higher right shoulder reversal. The less aggressive, $6,160, the almost symmetrical right shoulder reversal. And the least aggressive, $6,000, the dangerous lower right shoulder reversal. Lesson 3 also taught us to ignore the word on the street, so $6,000 should be ruled out. That leaves us the most likely price to find a bottom, our current price, $6,160. Not too aggressive, not too ideal. However, there hasn't been the bounce yet that one would expect from our perspective, which opens the door to The Bruce Willis Scenario.
It could be the case that the prevailing forecasts of a $6,000 defense are correct, but it's the last possible price area to create a higher low and a right shoulder. Remembering that we don't get to pick the bottom, we have to let the bottom pick itself, I've decided to keep my position open until breakeven, at $5,900. Dropping below $6,120 will invalidate a reliable Inverse Head & Shoulder, according to the scenario in my previous post, but just as we should ignore ideal prices, we should ignore ideal patterns. But let this post be a wake-up call to everyone: there still could be more downside to come.
Comment:
Another exciting daily close for Bitcoin. The previous night, we couldn’t muster enough bulls for the aggressive right shoulder entry of $6,260, but it looks like we might have found enough buyers around the $6,160 less aggressive entry. Not too aggressive, not too ideal...just right. Now we can begin to question our Bruce Willis Scenario and revert back to our traditional Inverse H&S scenario. This daily candle’s longer lower shadow is certainly indicative of the potential for a real right shoulder, but the bulls will have to follow through in the next two days. If they do, or if they fall asleep at the wheel, I’ll be back for a new post.
Comment:
Nothing to report so far today, and there might not be any real price movement until around the daily close. For bulls, you want to see this flag extend itself this weekend, especially by the weekly close, to form a real right shoulder. If it fails, we'll go down to $6,000 - $5,900 to find more bulls, but if none is found there, we have validated the Bruce Willis Scenario. Just remember that continuing up is not guaranteed. Expect every series of events, no matter how uncomfortable, see them play out in your mind, and you'll never be surprised.
Comment:
So yesterday the bull flag failed, but the failure wasn't as bearish as expected, as we didn't make a lower low since our drop from the neckline. This formed a bullish double bottom, so it looks like the bulls who missed out on their entry at the bottom of this possible right shoulder got a second chance. This is definitely a bullish sign, and decreases the chances of the Bruce Willis scenario, as we could very well be in the process of forming the real right shoulder.
Comment:
New analysis for you guys.
