The market remains lacklustre, but relatively predictable. I've had more success with recent BTC price predictions than what I normally have – which gives me added confidence in my current buying strategy. This post explains that strategy.
It's no secret that I have had BTC buy orders in the $8000s for a good few weeks now, if not months. I constantly check the charts and update my TA in order to ensure that my buy orders remain valid. At the moment, I am happy that they are set at the right prices. I will now explain why:
Firstly, take note that I have done away with my regular diagonal Fib levels for the time being. As the bullish price action drew to a close, so those levels started to lose their relevance. The nature of the current market correction is such that diagonal Fib levels no longer a reliable means of price prediction. Obviously this will change at a later date, but for now I find no value in using them.
I predicted a BTC reversal of fortunes and a price drop over the weekend (on Twitter and in the TIMM Trading Pits). That price reversal/drop occurred late on Friday.
Calling the price turnaround was not hard, the TA was pretty clear. What is still unclear for now, is whether BTC is in a bearish converging triangle or a negative channel. Fortunately this doesn't matter much – as the outcomes of the two are fairly similar – at least for investors.
Below we can clearly see how BTC respected the top of the channel/triangle and became negative – a trend which should now continue for the remainder of the working week, possibly longer.
It could be that the top of my channel/triangle is not correct (because I have excluded short-term outlier candles), but thanks to the latest data, it looks as if making the top of such a channel/triangle less steep does not tie in with the observed price movement data. The upper limiting line which I have created ties in nicely with the bottom of the channel, i.e. it runs parallel to it, giving credence to my theory that what looks like a triangle may still be a channel.
Channel or not, we are seeing support at $9500 – giving credence to my theory that BTC may be in a triangle despite looking as if it is in a channel. Looking at the bigger picture, I see no reason why BTC can't be in a triangle within a channel – which I now believe is actually the most likely state of affairs.
Upon reaching support at $9500, I believe there is a good chance that support will not hold (as indicated on the chart below). Perhaps I'm wrong and it will hold. Perhaps BTC will bounce back up to the top of the triangle, before turning negative again. Much like I said in my post a week ago, other indicators such as trading volume and various momentum indicators show that a positive breakout for BTC is very unlikely at this stage. What this means is: if BTC does not break downwards through the bottom of the triangle this time, then it will probably do so the next time it tests the $9500 support level.
Looking at the chart above in more detail, we can see a historical support level exists between roughly $8100 and $7500. Provided that BTC price does break lower, I expect this support level to arrest the drop in price. Should it fail to do so, then price should stop dropping when it reaches the bottom of the channel – roughly at $7000 (that price changes over time due to the downwards slope of the channel).
So where should an investor look for a buy point?
Bit Brain's BTC Buying Tactics
There is a risk that BTC hits the bottom of the triangle, and then bounces back upwards, never to return so low again. Chances of this happening are slight, but not negligible. For this reason it may be a good idea to buy at the turnaround point of $9500. I am making $9500 an "Optional Buy Point' for myself.
If BTC price decline slows significantly as it approaches $9500, I will assume that it does not have the momentum to break through, and will set a buy order just North of $9500 to avoid missing out on the dip. This will not be a big order – perhaps about 20% of my allocated funds – because there is still a fair chance that price will drop lower later on.
However, if BTC approaches $9500 at speed, chances are that it will shatter the support there. In such a scenario I will not buy at $9500, instead I will wait to buy in the $8000s, as I have been for the last couple of months. Since there are no other meaningful support levels in the area, I will not buy in the low $9000s. If BTC does break downwards through $9500, it should hit the $8000s – which is where I will start buying (as indicated on the chart below).
"Buy Zone 1" is my main buying zone, it lies between $9000 and $8100. I plan to spend 60% of my allocated BTC buying funds there – with the option of spending more if it looks like BTC won't go any lower than $8000. I have buy orders at around $8900, $8500 and $8200 – these vary as my local currency fluctuates against the dollar, so I have to adjust them from time to time. At $8100 we once again encounter historical support – so that is where I stop buying.
Should BTC break through that support, I will be ready to pick it up at prices of between $7400 and $7000. This is "Buy Zone 2". $7000 is the bottom of the channel (at least for now). If BTC fails to reach Buy Zone 2, then I will spend all of my BTC buying funds as the price moves back upwards through "Buy Zone 1".
I do not see a scenario where BTC will drop below $7000. Firstly, because $7000 is the bottom of the channel, but secondly (and probably more importantly), because BTC can't drop below $7000 without breaking through the Long-term Base Trendline. (as seen below).
The Long-Term Base Trendline is four years old and well established. It is highly unlikely that BTC can remain below the level of this trendline for very long. As a side note: I believe this trendline to be a measure of BTC adoption as well as the baseline from which any rally is launched. Interestingly, if I'm right about that, it means that reaching the trendline indicates that there is no hype in the market at that time.
If BTC does break though the long-term trendline, it will become incredibly unstable and likely to bounce back fast and hard. It also means that I will be willing to place even more money into it – money I will rob from my normal fiat money savings accounts. Obviously this is risky and not something I would recommend for most people. I'm telling you what I will do under such circumstances, not what you should do.
This unlikely buying opportunity is labelled "Unlikely Buy Zone" on the chart below.
That rounds up my latest weekly look at BTC. As for the rest of the market: altcoins remain in decline – providing excellent buying opportunities for shrewd investors who are willing to do their homework. In the bigger picture, I watched in amazement late last week at how money floods out of stores of value and back into the fiat-based markets on the slightest little whiff of optimism wrt US/China trade talks. They're not even building a house of cards anymore, they're building a house of rice paper. And it's starting to rain…
Yours in crypto
All charts made by Bit Brain with TradingView
"The secret to success: find out where people are going and get there first"
~ Mark Twain
"Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful"
~ Bit Brain