Daily Report – Bitcoin and Market Update (November 2 2022)
HTF 12H:
As the daily chart maintains the breakout position at a lowered volatility, the middaily chart hoovers above the critical threshold.
The CTF Trailer Stop level at 19827 is the main line in the sand, which BTC should not break out below, in order to maintain the bullish advantage.
With a local overthrow on top, there are chances for BTC to retest the 20000 USD support, and the territory around. It is due to the phenomenon where failed patterns tend to perform better in the opposite direction than anticipated based on the initial breakout directions.
With today’s FOMC conference announcing the rate hiking decision, the volatility can easily harm BTC bulls in the near term.
MTF 4H:
The medium term chart at 4H time frame, portrays a fairly neutral picture, locally.
The overall tendency seems to be sideways-dominated, with a little bit of an upwards burst to the right hand-side.
As a result, Bitcoin prices can become vulnerable to today’s expected volatility around the FOMC board decision announcement.
If the upwards trend was more upwards oriented, with a steeper angle of ascend, the bulls would be less at danger.
On the Momentum Bands side, defined by the BPRO, BTC moves in the sideways regime of volatility, where it has almost equal chances of retesting either the 20000 USD support, or the 21000 USD resistance. It’s right in the middle zone.
Because of that, traders should be ready for a choppy environment with a lot of whipsaws in the upcoming days – especially, today (event trading day) at 2:00 PM EST.
The FOMC Board Meeting Announcement is considered an event trading day.
More often than not, during the event trading days, volatility (risk) ramps up as the anticipation builds toward the announcement, followed by a “sell the news” type of behaviour right after the announcement. It oftentimes generates price shocks, where the volatility spikes 5 times more than regular. As it happens, the price often deviates against its average, to only come back and reset the move soon after.
Statistically, hence, trading through the noise and choppy environment around the news release yields hardly any technical advantage for the traders. Seldom, it offers better odds than an actual coin flip 50/50 – mainly, because the price shocks tend to retrace back to the original levels from before the announcement.
Price shock directions are often driven by the traders’ expectations. At the moment of the news announcement, the reality check is faced and the disparity between expectations and reality arises. The bigger the disparity, the larger the price shocks, and the greater the risk of being on the wrong side of it.
Most likely, because the price shocks refer to short-term events – often single days – it should be expected to bear only short-term implications. For this reasons, it is rarely a good assumption that the short-term news release would hold long-term implications.
Per the traders’ expectations, the target rate probabilities align at 88.2% chances in favour of the 375-400 bps. It implies that traders are pricing in a 50-75 bps rate hike. In case such majority of investors get surprised negatively (with a greater rate hike, e.g. 100 bps), then the negative disparity appears to drive the prices lower, most likely. Conversely, if traders’ anticipations are worse than the actual reality check, the prices can react positively with a rapid price spike.
Taking all into consideration, an average risk averse or risk neutral trader is recommended to try to resist the urge to gamble through this period of increased risk, surrounding today’s FOMC decision. Trading through an event day hardly ever offers favourable odds of guessing the trade direction right.
Even if guessed the trade correctly, resulting in a win, the windfall profit should be closed immediately, knowing the prices are more likely to retrace back to the prior levels.
Please consider the above elaborate, and decide if it applies to your trading style.
Hope it helps. God bless.
P.S. I’ve got something nice coming for you – see the tweet attached.
