Daily Report – Bitcoin and Market Update (January 04 2020)
BTCUSD closed the week in a very bullish way printing the biggest weekly candle ever. Biggest volatility is typical right before major retracements. You heard it here in my last reports right before today’s 6000$+ slide to the downside for total of 20% drawdown within a matter of few quarters. Indicators were pointing towards massive decline and so far it looks that the anticipated MTF retracement has just started. Abnormal volatility came with ADX peaking at historical levels that always brought retracements. Momentum is heavily overbought, which is quite common in strong uptrends. January and February most of the time bring retracements across the board. The move is over-extended clearly. Long story short. I’m sticking with my blow-off top concept and potential retracement down towards 20k area. Am I certain my correction concept will succeed? Of course not. Bitcoin has just brough additional confirmation to the given scenario and that’s the way to interpret this.
Daily candle was the blow-off spike in fact. 6k range of decline means that big money left the market – took profit, at least on portion of their capital after massive upside rallies. Don’t get fooled here. Big money don’t need 1000000% returns to get rich. They are rich already. After you’ve become rich, your main duty is to sustain and de-risk your equity and focus on smaller and more certain returns. If somebody tells you, that institutions are buying at 35k after 800% rally with no retracement, then it’s safe to dispute this claim. Instead, wise money will focus on buying lower if at all. ADX peaked signalizing peak of the movement from 20k to 35k. Is this bull market finish? Of course NOT. At best, it’s MTF retracement that is supposed to get investors lower entries to follow the major bull run continuation. As mentioned number of times, things are going to get much more rough from here further on due to the volatility increase. Average volatility per ATR 2-3 months ago was about 300$. Now it’s about 1.6k which makes it x5+ increase in size and risk. The higher it goes, the safer it should be played. De-risk heavily over exposed positions by taking profits, which can later be used to scale in and compound lower, or enjoy free cash that’s always needed in a healthy portfolio. VWAP 1 at 27715 was tapped perfectly and gave very bullish reaction. So far It looks that 27.7-30k zone was of big low timeframe demand. If the correction thesis is correct, then it should be reclaimed by bears quite quickly in next few days.
Middaily brings another evidence that an actual trend shift may be occurring for some short period. Momentum broke down a wedge/triangle and clearly broke channel support. It indicates that most probably, after first close below the momentum low from Christmas time, the momentum would reach the other bound – oversold zone that would print beautiful LTF-MTF buy signal. Supports are as follows: 28380, 24200, 19800. VWAP levels to provide strongest bullish reaction upon are given as key supports determined by volume. Below those it will rather be only liquidity hunting. While discussing through the correction concept, do not forget that we’ve just entered most aggressive parabolic rally phase. Correction will rather be quick and violent with lots of liquidations. The steeper the trend gets, the shorter the corrections and the more aggression.
MTF picture is showing that the actual size measured not from the very peak of the market (not just the day) to the very bottom of the decline is as large as 7000$. It’s the largest downside move for bitcoin EVER in a single few-hour period. As reads, $180M in long liquidations only today. Current market trend is naturally sideways until either way breakout occurs. Momentum is trying to present bullish crossover and in case it gives, low timeframe longs can be applied in tandem with oversold 15min and 1h momentum. Any deeper decline into the 27.7-30k demand zone, closed inside this zone, would give cleaner confirmation that the area is being controlled more and more by bears. It could be the symptom of further downside declines. Until that happens, BTCUSD is perfectly at mid-range level as we speak. Typical range play suggests buy the the range lows and sell the range highs. Expecting the market to establish lower high inside 33-34k area, although if the correction mode is on, the the pullback to the lost levels should be rather quick one and rejected. Best buying opportunity is confirmed when 4H momentum presents bullish cross inside/near oversold area.
Hourly timeframe is presenting traders local triangle breakout (beware fakeouts) and if that’s the actual case also after the daily close, then we may see BTCUSD proceed into LTF supply zone 32.8-33.8k. Notice how wide the zones area. It’s due to increased volatility which never before has been to such an extent. Wide zones mean big volatility and big risk inside. Pivot potential is given inside the zones. Compare the LTF demand zone which on intraday basis was confirmed today to be 27.7-30.2k. That’s where selling or taking profit into is rather dangerous and similarly longing 32.8-33.8k is also not of best risk/reward ratio. Momentum advancing and may get additional backup from 4h bullish crossover if confirmed. If the triangle is violated and mid-range level is rejected, then I would anticipate few more oscillations inside the demand zone first. Remember that for now it all remains to be the toppish area. Is this the perfect top for the start of retracement? Only God knows this. You should be prepared for both cases and that’s solved with proper risk management and portfolio structure. Example: whenever Im playing big money and Im uncertain about the market direction, I prefer to go 50/50 BTC vs USD and this way Im hedged and covered in both directions. To sum up: If the top is in, we would most likely see 20-22k region revisited in matter of next few weeks. Weekly close through current ATH would locally invalidate the correction setup and push BTC straight to 40k or perhaps 46k and that’s where another big rug pull would be expected. Staying flat is better than losing, no matter what you think. Less is more at times yet unrealized profits are no profits. That’s for sure.