Welcome to this weekly series from the TradeRoom. My name is Dave and I’m the founder of The Crypto Den, an Australian-based crypto trading and education community aiming to give you the knowledge to take your trading game to the next level.
Crypto Market Outlook
Welcome to my first analysis of 2022! I hope all of you had a wonderful break over the holiday period and have been keeping safe!
Bitcoin has seen some nice bearish price action over the holidays, which wasn’t overly unexpected. Coming into Christmas, the warning was basically to expect volatility as when the market loses liquidity it becomes easier for big swings to occur.
In my last article of 2021, I pointed out that the TOTAL market cap was hitting a key level of resistance and it failed to break through spectacularly, wiping off US$500 billion. There’s a pretty good chance we’ll see some consolidation before more downside to the US$1.7 trillion level.
TOTAL Market Cap
Keeping it really basic this week, BTC is sitting right on what’s probably the most important level of support/resistance. If this US$40,000 level of support holds, my current analysis shows a bounce in price action to US$45,000, however, and here’s the warning – if there is low volume in such a move, I’d be confident in saying it’s a relief rally before further downside. The only point at which I’ll become full bull again is if BTC breaks and closes above US$53,000. Yep, US$10,000+ trading range needs to be cleared before I’m comfortable with a bullish cycle.
Does this mean I won’t trade within this range? No. As traders we stay fluid and move with the market, and trade the session we are in.
For me at the moment, the two most likely moves we will see from BTC are:
- a relief rally to US$45,000, then a large sell-off of over US$10,000 taking us to US$35,000; or
- this current level of support fails and we go straight to US$35,000-US$30,000.
Regardless, I’m still expecting more downside action.
My game plan? Well, I’m already in short trades on both BTC and ETH so I will keep these open until I see some candlestick analysis suggesting an uptick in price action. I will likely add to my positions if we hit the US$45,000 dead cat bounce.
In short, this level of support at US$40,000 must hold or things will get very red very soon.
Last Week’s Performance
Apart from my two shorts in BTC and ETH, I haven’t really been trading over the Christmas break so I don’t have any to share at this time. So I will share my entries on BTC and ETH:
After the first big sell-off from the beginning of December, BTC has seen a bounce in PA back to US$51,000, which was also the 61.8% Fibonacci retrace zone of the previous structure. My reason for entry was the four-day rejection at this key level and buyer exhaustion wicks. On a 20x trade, this short has yielded just under 400% profit in the most recent drop. This is basic price action trading using support and resistance (S&R).
Like BTC, my short entry on ETH was based on the basics of S&R and Fibonacci. ETH retraced 61.8% of the previous structure and after four days of bearish candles I entered from a buyer exhaustion wick. This is a 10x trade, currently sitting at 250% profit. The trade is still active.
This outlines the importance of understanding candlestick analysis at key levels of support and resistance and having the patience to wait for the market to come to you.
This Week’s Trades
This week I won’t be sharing any new trade entries. The reason for this is that I believe at this stage the market will see further downside, and most people are buying and selling assets as opposed to trading futures.
I will be keeping my short trades for BTC and ETH open unless candlestick analysis shows me a reason to close them. I might enter ALT short trades if a good setup is there, but that’s a big maybe. The market needs a clear direction first.
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