Market Update #76: Soak up the Sun
Market Update #76: Soak up the Sun
Every time I turn around I'm looking up, you're looking down Maybe something's wrong with you That makes you act the way you do
We are well into the bearish alignment in cycles. Hints of the reversal are subtly appearing. I'll get into that below. Here are the links for the Q2 forecast and segments of the live stream review of the forecast. Give them a look.
Q2 Forecast
Livestream Replay
In case you are new to the analysis the commentary following the "Given the week's current technicals:" reflects my operational thought processes utilizing my trading tools in the context of the daily chart. It is how I would assess taking action or not, depending on a hypothetical current positioning. My trading preferences tend toward the "Conservative" approach, but I take "Risky" positions when warranted. In reading the analysis, the "Conservative" options/opinions are generally my expectations of the specific asset's performance until the next post.
I've also started including a volume metric. I’ll get more into it as it becomes relevant to the charts but here’s a quick primer. It's a combo of two preexisting scripts. Here's a quick video about it. You'll also notice in the images below in the analysis that I've changed the color from red to orange to step away from preconceived associations with red on a chart. I encourage my indicator users not to change colors to red/green for easier identification/association so you don't bring in unnecessary bias or assumptions because of the recognizable chart color.
Summer is still on luckily. It's been pretty nice. So many days out touching grass. Back-to-back weekend tournaments. Hope your days have been nice as well.
BTC/USDT Daily Chart
https://www.tradingview.com/chart/jjSdFW4b/
From last post:
"... I'm not opening new longs at this level... I'm not opening new shorts until the structure has confirmed bearish. A daily close... below $27.1K... a rally on the 2HR timeframe... extending towards $28K, bringing a bearish setup and trade trigger on the CSM... the precision entry for the daily chart structure shift."
Since the last post, support level invalidations occurred and followed through with downside price continuation as expected. They also brought about the bullish reversal setups on my custom indicator the Correction Strength Meter (white arrow). This is an indication I've been waiting for since the bearish signal in April, and it's in line with the timing in the cycle analysis from the Q2 Forecast. Keep in mind this is just a setup and not a trade trigger. Confirmations will probably come in sooner than later. The RSI (yellow arrow) breaking above the midline and top adaptive band may kickstart the next daily chart bullish trend.
Given the week's current technicals:
If I'm not in daily chart BTC Longs:
(Conservative) I'm not opening new longs at this level since the structure has changed to a bearish profile (lower low and lower high pivot points). To enter a new long position I'm waiting for either a change in structure to bullish OR the conjunction of signals of the CSM bullish signal with an ideal RSI setup in timing agreement with the cyclical bottom. There's no particular price level this needs to be or where I am expecting this to occur. Outside of technical factors, I'd consider a buy bid at the green support line at $24.6k. Whenever/wherever the entry occurs will dictate the profit target location.
(Risky) I'd consider opening new longs under two conditions. First would be a 2HR chart structure shift to a bullish profile (higher low and higher high pivot points). This particular entry would be a risky frontrunning of a daily chart bullish trend shift. I'd abandon this position at a bearish trend shift on the 2HR because the prevailing daily trend is still down. The second condition would be a breakout on the 2HR chart from the $28.2K level IF bearish divergences are not present or are being invalidated on the CSM or other price action oscillators. I'd keep the stop loss under the most recent low pivot point below the breakout level. I'd be looking to start derisking from the position above $29.5K but ideally at the local high of $31K.
If I'm in daily chart BTC Longs:
(Conservative) With continuous lower low closes on May 11, 12, 13, 21, 24, and Jun 5, if I'd not exited longs there's no point in acting now. The opportune window to exit has long passed, and I'd hold my positions open unless a daily close comes in under the June 5 close at $25.7K. As bullish divergences are starting to appear, lower lows are less likely than they were a few days ago.
(Risky) No suggested risky entry conditions occurred since the last posting, so if I had jumped in randomly, I'd now take the same conservative exit.
If I'm not in daily chart BTC Shorts:
(Conservative) With bullish divergences on the daily chart and prices near the middle of the range ($24K-$28K), there are no conservative short-entry options. Prices would need to rally to 28K again with intraday bearish divergences on price action oscillators to evaluate shorts. I'd still be slightly less inclined to take them with the daily chart technicals starting to suggest a bullish reversal.
(Risky) Similarly to the conservative approach shorts are becoming less ideal. There are two conditions I'd consider. A rally towards $27K - $27.5K on the 2HR chart with bearish divergences on most of the oscillators and a bearish trade trigger on the CSM would be a risky entry, but I'd keep a stop loss at closes above $28K. I'd also consider a breakdown from $25.7K targeting at least $24.5K and below. This is a less-than-ideal entry as the risk-to-reward ratio is pretty slanted to the risk side.
If I'm in daily chart BTC Shorts:
(Conservative) The ideal entry from the last posting played out, and short exposure would be on. I would have begun to derisk at the most recent lowest low at $25.8K, ideally targeting near the lower support around $24.5K - $25K. As the initial $25.8K has been reached, and the position has taken some profits holding the position back above $28K and going negative is not ideal, and I'd exit the short. A risky reentry could be entertained at that level though.
(Risky) The risky entry due to the daily close under $27.1K and invalidation of bullish divergences on the CSM on the 2HR timeframe from the evening on May 11 at around $26.6K would not have reached the targets at $24.5K - $25K. It would have taken on a considerable negative fluctuation as prices rallied up to $28K in late May but would have resolved in greater profit as conservative entry signals occurred as well where adding to the existing short position with reduced risk would have eventually bailed this position out at the similar 25.8K profit target.
ETH/BTC Daily Chart
https://www.tradingview.com/chart/gTkSjkj6/
From last post:
"... RSI... above the midline, suggesting a bullish influence... breach above the adaptive top band would suggest bullish price continuation..."
Since the last post, the ETH/BTC ratio has maintained bullish momentum. The RSI (yellow arrow) broke above the top band near the end of May, and prices began to clear above the 0.068 resistance. There are two things to monitor in the future. The blue arrow marks the most recent highest high. If prices start registering above this level, but the RSI (yellow arrow) has turned down to lower levels than the current measurements this will set up bearish divergences suggesting a potential reversal. This would agree with the second condition to monitor. The RSI is turning back down towards the top adaptive band. Returning between the top and bottom band would suggest a near-term ceiling has been established.
Given the week's current technicals:
To execute these entries:
For longs, I'm rotating BTC to ETH OR
buying ETH to sell back to BTC OR
buying an alt with a similar ALT/BTC chart to sell back to BTC.
For shorts, I'm selling out to BTC or USDT.
If I'm not in daily chart ETH/BTC (or altcoin) Longs:
(Conservative) I'm not opening new longs at this level as prices are likely under resistance or notable prior highs. Ideally, a daily close comes in above 0.071. At that point, a retracement on the 2HR timeframe leading to a bullish reversal trade trigger on the CSM would be a precision entry for the daily chart breakout of the 0.071 level. I'd use the 2HR CSM stop-loss to negate the trade idea, as this is a conservative approach, and I'm not willing to take on a full stop down to the most recent daily chart pivot point around 0.068.
(Risky) I'd consider opening new longs for the breakout using the 2HR timeframe if bearish divergences are invalidated while prices maintain closes above 0.071. I'd be evaluating the failure of the support structure on the 2HR timeframe (at the moment, around 0.0695) to consider abandoning the trade idea. This level may be higher depending on how higher lows develop over the week and my risk appetite.
If I'm in daily chart ETH/BTC (or altcoin) Longs:
(Conservative) The CSM bullish trade signal on April 13 would have led to a conservative entry after prices closed above the 0.068 resistance while setting a new higher high close. This position, however, spent a considerable amount of time underwater but has since returned to profitability. Ideally, I am targeting up toward the resistance at 0.072-0.073. However, there are a few extra considerations. The RSI is near returning between the bands. This would suggest a near-term ceiling at the same prior level of 0.071. Initial profit-taking would be on the table in that event. I'd prevent the remainder of the position from going negative again then look for a new entry position on a retest at 0.068 if the 2HR chart supports a technical reversal there and no bullish divergence invalidations.
(Risky) This exit from the initial bullish trade CSM signal in April has since passed. While the position would still be positive If I were still in it, I'd need to consider whether I want to hold the open positions for a secondary target near 0.072 or take my profits from the same conservative exit conditions.
If I'm not in daily chart ETH/BTC (or altcoin) Shorts:
(Conservative) An ideal rotation back to BTC or alt shorts may not appear this time. Ideally, a bearish divergence will appear as the chart increases over 0.071 with waning momentum. Alternatively, a conservative short entry or rotation can occur after the support structure at 0.068 has some daily closes below with the RSI breaking below the midline and bottom adaptive band.
(Risky) Risky short entries or rotations back to BTC could be entertained with a daily close on the RSI measuring between the adaptive bands and bearish divergence triggers on intraday timeframes between 2-6HRs. I wouldn't consider this an ideal position as impulsivity in the other direction may lead to highs not seen for months and I'd be underwater on maybe some of the best bullish breakouts since last year. Better short setups should occur from 0.071 to 0.073 or (if there is a breakout) at 0.078 to increase the reward and lower the risk.
If I'm in daily chart ETH/BTC (or altcoin) Shorts:
(Conservative) There haven't been any conservative short conditions so there shouldn't be short exposure. Still, if I jumped in somewhere randomly I'd be looking for the negation of that bearish trade idea with closes above the recent highs, the RSI breaking, staying above the daily chart top band, or invalidation of 2-6HR intraday bearish divergences. At that point, I'd start closing out of the positions as the risk of bullishness increases.
(Risky) The risky 2HR chart bearish front-run trade idea last post presented itself late on the 24th and hit both 2HR targets. As I'm using a smaller timeframe in a riskier, higher timeframe context, I typically would derisk at the second smaller timeframe target for initial profits or at the least not allow for negative positioning. The second 2HR chart target was hit later on the 28th before returning toward the entry position and running above 0.068. Had profits not been taken invalidation at the 2HR chart CSM stop-loss would have negated the trade idea at around 0.0687, and there'd be no further short exposure. If that were also missed, I'd still be short and underwater now and use the conservative exit conditions.
In the last post, I mentioned the potential for an earlier ETH/BTC and ETH cyclical rally. That snapshot is re-posted below. Note the white forecast lines projecting the directional influence of cycles.
Below is the up-to-date snapshot. ETH/BTC followed through on that rally. ETH had a minor rally on schedule with the following decline. We are nearing the bottoming of the BTC and ETH cycles and peaking of ETH/BTC. With the ETH/BTC chart on the rise, it should be a bit more stable in the decline than BTC.
ETH/USDT Daily Chart
https://www.tradingview.com/chart/xbB6lkZu/
From last post:
"... RSI begins to curl back up between the adaptive bands... may suggest a potential floor forming at around $1794..."
Since the last post, the RSI (yellow arrow) failed to break the bottom band again. The floor has been maintained keeping the daily chart close above. Consolidation between 1800 and 1900 has continued, and the RSI's adaptive bands have also moved to reflect that consolidation and potential for volatility. A breach of the top band would likely see prices extend upwards into the higher 1900s and a downside breach of the bottom band would likely see tests below the 1780 support again. With the RSI currently measuring above the midline, a bullish break would have more likelihood in my speculation.
Given the week's current technicals:
If I'm not in daily chart ETH Longs:
(Conservative) There are no new conservative entry conditions as exposure was already warranted. Once the RSI got back inside the top and bottom bands, loosely a pattern of higher low closes and higher high closes was completed on May 23rd, and the hunt for a precision entry on the 2HR timeframe to enter a long began. A trade setup occurred the following day with the pullback to the green support arrow on the 2HR chart. The CSM signaled a bullish trade (at $1787) with the 2HR RSI returning between the bands suggesting a potential floor. I'd take the precision entry for the daily chart bullish trend shift at that point. Given initial targets on that position have been hit and the selloff back to $1780 with the invalidation of the bullish divergence on the CSM on the 2HR timeframe reentry now would be risky, not conservative, and no entry would be entertained at this level. Outside of those technical factors, I'd consider a buy bid at the green support line at $1650.
(Risky) I'd consider opening new longs at this level using the 2HR timeframe for the daily chart support bounce. The 2HR chart CSM shows a single bullish divergence setup which has been invalidated suggesting bearish price continuation however the RSI is curling back up potentially moving back inside the bands. If that happens a risky entry would be entertained and a stop-loss would be placed under the lows, basically the $1774 support. If 2HR chart closes occur under that support, I will abandon this long position.
If I'm in a daily chart ETH Longs:
(Conservative) Loosely a pattern of higher low closes and higher high closes was completed on May 23rd, and I'd begin looking for a precision entry on the 2HR timeframe to enter a long. A trade setup occurred the following day with the pullback to the green support arrow. The CSM signaled a bullish trade (at $1787) with the 2HR RSI returning between the bands suggesting a potential floor. I'd take the precision entry for the daily chart bullish trend shift at that point. Derisking would occur at daily chart resistance starting at the labeled zone around $1910, $1990, and ultimately the high close at $2118. Initial targets were reached, but the remainder of the position would be closed out at breakeven on the selloff on the 5th. Had I missed or not taken that profit target partial exit at $1910, I'd now be underwater, holding until a daily close under the floor at $1794 where I would close the longs. Alternatively, I'd use a risky entry to add to my position, reduce my average entry price, and close the long with that setup's invalidation.
(Risky) The impulsivity of this move after reaching the initial resistance target at $1910 didn't offer much in the way of technical exits with multiple confluences. Bearish divergences intraday on the 2HR were invalidated suggesting the potential for a break of resistance, and the structure shifted inconsistently. With no risky exit conditions, I'd be forced to hold the position underwater, and the conservative exit would be sought out.
If I'm not in daily chart ETH Shorts:
(Conservative) I'm not opening new shorts until the structure has confirmed bearish. Ideally, a daily close occurs below $1780. At that point, I'm waiting for a rally on the 2HR timeframe. This rally moving up towards the recently broken level bringing a bearish setup and trade trigger on the CSM, would be the precision entry for the daily chart structure shift. I'd keep a stop loss relatively close, drawing a resistance line around 1920. This level has historically kept bullish price action at bay. A daily close above that recently has led to bullish spurts that I'd not want my short exposed to as it could also quickly lead to ETH into new 52-week highs.
(Risky) The impulsivity of this downside move didn't offer much in the way of entry conditions with confluences I would act on. Bearish divergences intraday on the 2HR were invalidated suggesting the potential for a break of resistance, and the structure shifted inconsistently. Suppose now the daily chart RSI closes below the bottom adaptive band. In that case, I'd consider front-running a structure shift for a risky short entry with 2HR closed under the floor at $1794 and if ALL bullish divergences on the CSM are invalidated.
If I'm in daily chart ETH Shorts:
(Conservative) This wouldn't have any considerations as, IMO, conservative exposure isn't warranted yet. Were I in a short I'd be exiting at a daily close above the highs at $1910 or taking profits at $1794.
(Risky) This wouldn't have any considerations as, IMO, risky entry conditions never occurred but if I were exposed, I'd be exiting shorts under the same conservative conditions.
The timing window of cycle lows and technical reversal factors is coming into play very soon. I'll keep the posts coming in with greater frequency and toss in some extra stuff. I'll add a section with various watchlists updated regularly with breakout candidates. Keep your eyes peeled.
@theprivaysmurf