LINK → Chainlink Dropping from Double Top? Going Down to $10?
LINK completed a measured move and attempted to break past the Resistance Zone twice without success. Does that mean we have justification to short?
How do we trade this? 🤔
A low probability, low risk, high reward trade (a reversal) was reasonable after the Daily candle closed on December 15th. That was a strong bear bar closing on its low after the double top, now we're stuck under the 30EMA and having a hard time getting back up.
You can also reasonably short here at a 1:1 Risk Reward Ratio. Your position size should be smaller since we're further away from the justified stop loss position above the Resistance Zone. Shorting to the Daily 200EMA support is a solid target but remember, this is technically a counter-trend trade, so we need to watch every candle for a sign that we're bouncing back toward the upside.
💡 Trade Ideas 💡
Short Entry: $14.150
🟥 Stop Loss: $17.650
✅ Take Profit: $10.650
⚖️ Risk/Reward Ratio: 1:1
🔑 Key Takeaways 🔑
1. Measured Move Complete, Potential Double-Top Reversal.
2. Price fell from Resistance Zone. Reasonable to Short Scalp.
3. Teacup and Handle Pattern did not play out.
4. Far away from Reasonable Protective Stop, Small Position.
5. RSI at 45.00 and below the Moving Average. Bias to Short.
💰 Trading Tip 💰
Your position size should be proportional to your risk and relative to your maximum allowed loss on a single trade.
Example: A $100 trading account using the 1% rule should lose no more than $1 on a single trade. That means if your stop loss is further away, your position size needs to be sized so that your loss equals no more than $1.
⚠️ Risk Warning! ⚠️
Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
Like 👍 and comment if you found this analysis useful!
How do we trade this? 🤔
A low probability, low risk, high reward trade (a reversal) was reasonable after the Daily candle closed on December 15th. That was a strong bear bar closing on its low after the double top, now we're stuck under the 30EMA and having a hard time getting back up.
You can also reasonably short here at a 1:1 Risk Reward Ratio. Your position size should be smaller since we're further away from the justified stop loss position above the Resistance Zone. Shorting to the Daily 200EMA support is a solid target but remember, this is technically a counter-trend trade, so we need to watch every candle for a sign that we're bouncing back toward the upside.
💡 Trade Ideas 💡
Short Entry: $14.150
🟥 Stop Loss: $17.650
✅ Take Profit: $10.650
⚖️ Risk/Reward Ratio: 1:1
🔑 Key Takeaways 🔑
1. Measured Move Complete, Potential Double-Top Reversal.
2. Price fell from Resistance Zone. Reasonable to Short Scalp.
3. Teacup and Handle Pattern did not play out.
4. Far away from Reasonable Protective Stop, Small Position.
5. RSI at 45.00 and below the Moving Average. Bias to Short.
💰 Trading Tip 💰
Your position size should be proportional to your risk and relative to your maximum allowed loss on a single trade.
Example: A $100 trading account using the 1% rule should lose no more than $1 on a single trade. That means if your stop loss is further away, your position size needs to be sized so that your loss equals no more than $1.
⚠️ Risk Warning! ⚠️
Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
Like 👍 and comment if you found this analysis useful!
Comment:
Our stop loss may have been kissed depending on your broker! No matter, another short opportunity may be playing out or if you're still in your short based on my analysis, don't exit yet!
If this current Daily candle closes below the Resistance Zone, look for one more strong bear bar to close on or near its low below the 30EMA. A re-test of the 30EMA as resistance would be additional probability in your favor, but I don't think its required to enter the short.
When those conditions are met, I would short at $14.65, stop loss above the current candles wick at $18.30, and a take profit at $11.00 just above the 200EMA. Increase your position size once we have this confirmation as our probability of profit will be much higher. This will, as a byproduct, cover the losses (if you got stopped out), from the previous small position trade. The more probability we have on a reversal, the greater our position size can be.
Our stop loss may have been kissed depending on your broker! No matter, another short opportunity may be playing out or if you're still in your short based on my analysis, don't exit yet!
If this current Daily candle closes below the Resistance Zone, look for one more strong bear bar to close on or near its low below the 30EMA. A re-test of the 30EMA as resistance would be additional probability in your favor, but I don't think its required to enter the short.
When those conditions are met, I would short at $14.65, stop loss above the current candles wick at $18.30, and a take profit at $11.00 just above the 200EMA. Increase your position size once we have this confirmation as our probability of profit will be much higher. This will, as a byproduct, cover the losses (if you got stopped out), from the previous small position trade. The more probability we have on a reversal, the greater our position size can be.
-Joe Dean
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Trader Engineering Course (Coming Soon!)
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Link has closed above the Resistance line and is deep into the Resistance Zone! It appears this one was not going to play out in our favor and we're likely going a bit further to the upside before we come down. This is why I suggested a small trade size given the conditions. The stop loss hasn't been breached yet! But it's not looking good. All part of the job. Let's see what these next few candles give us as I remain skeptical of much more movement to the upside and that a significant pullback is on the horizon for the crypto market per my recent Bitcoin Lifetime analysis: