Swing Trading Analysis 1/8/2014

[abednego]

Hey all,

I wanted to get back in the habit of sharing my strategy publicly.  Hopefully folks can learn about price action analysis and I can keep myself accountable in the process.  I'm a professional trader that has been trading Bitcoin as I would any other instrument since 2012.  I use Ichimoku Price Action analysis to back up my decisions.  I am fundamentally LONG TERM BULLISH (to the moooooon!) but make a living swing trading Bitcoin the same way I trade the Euro, Yen, etc.

Analysis 1/8/2014
Bitcoin moved up over the weekend to my target of $847.50 (I talked about this and Bitcoin's current Elliot Wave here: http://consultcoin.com/bitcoin-wave-pattern).  It went beyond but stopped right at the high of 12/10/2013.  Anyone waiting on a full retest of the high must wait a little longer.  There still remains a high probability to retest and break the high in time.

http://consultcoin.com/wp-content/uploads/2014/01/btc-1-8-2014-1024x560.png
Bitcoin 1/8/2014: Daily

Price is likely to remain stuck between resistance at $850 and support at $770 until Monday.  However, drilling down to the lower timeframes shows that a bearish trend could breakout if price gets below $750.  Price would then find support at $690.

http://consultcoin.com/wp-content/uploads/2014/01/btc-1-8-2014-2h-1024x525.png
Bitcoin 1/8/2014: 2 Hour

So what could happen Monday?  Probability could give us a hint in addition to price action.

I have had debates with Bitcoin traders about trading on weekends.  One postulated that because Bitcoin is the only financial instrument whose exchanges are open seven days per week that price should go up the most over the weekend with high volume.  Another observed Sunday there is a steady rise before the Monday/Tuesday pumps before a Thursday/Friday selloff.  The former is a logical anecdote; more hobby traders participating on the weekend because they have more time.  The latter is a good observation.

But are these ideas profitably tradeable?  Do the statistics agree and knowing them could we better time our entries and exits?

I broke down the data for BitStamp just using Daily Open versus Close.  Basically; was the day UP or Down?  To capture the data with the best relevance I used all days from 1/1/2013 onward.  So what was the probability for each day of the week to close UP?

Saturday: 47%
Sunday: 70%
Monday: 74%
Tuesday: 66%
Wednesday: 68%
Thursday: 55%
Friday: 57%

When you consider that during this time Bitcoin has risen +6100% the probability is skewed to the upside.  That means that even though Sunday and Monday seem to be the best days to go bullish is it wise to just GO on that day?  Probably not; unless the charts back it up.  What does stand out when considering the bias is the one day that fails to even break 50/50; Saturday.

Perhaps this dynamic is because there are no bank transfers of fiat moving into the exchanges for people to buy on Saturday?  Then when 3-5 business days land on Monday traders start buying again.  Those are fundamental reasons; fun to talk about but not trade on unless the charts back it up.

Strategy:

Wait for price to break Support @ $770 or Resistance @ $850.  Evaluate price action on Sunday.

If you want to keep up with my moves I'll be posting here or you can follow: http://consultcoin.com
 

[windjc]

If the 5th wave was the retest of the highs, how are we still bullish?

Are we back to Wave #1?

[mskryxz]

So the best time to buy looks like Thurs/Fri/Sat on average since they have a low probability of it closing up since 1/1/2013.

Thanks for the info and data, sir.

[arepo]

Price is likely to remain stuck between resistance at $850 and support at $770 until Monday.  However, drilling down to the lower timeframes shows that a bearish trend could breakout if price gets below $750.  Price would then find support at $690.

we're consolidating very bullishly in an ascending triangle formation just below $850 right now on stamp, and my calculations anticipate a breakout within the next 18 hours, give or take [edit: in 18 +/- 9 hours]. we still have a lot of volatility to work through after the panic selling we saw yesterday, so i'd be surprised if we stay within that range until Monday.

[damiano]

Price is likely to remain stuck between resistance at $850 and support at $770 until Monday.  However, drilling down to the lower timeframes shows that a bearish trend could breakout if price gets below $750.  Price would then find support at $690.

we're consolidating very bullishly in an ascending triangle formation just below $850 right now on stamp, and my calculations anticipate a breakout within the next 18 hours, give or take. we still have a lot of volatility to work through after the panic selling we saw yesterday, so i'd be surprised if we stay within that range until Monday.

Breakout up or down?

[arepo]

Price is likely to remain stuck between resistance at $850 and support at $770 until Monday.  However, drilling down to the lower timeframes shows that a bearish trend could breakout if price gets below $750.  Price would then find support at $690.

we're consolidating very bullishly in an ascending triangle formation just below $850 right now on stamp, and my calculations anticipate a breakout within the next 18 hours, give or take. we still have a lot of volatility to work through after the panic selling we saw yesterday, so i'd be surprised if we stay within that range until Monday.

Breakout up or down?

nothing's for sure, of course, but my money's on up.

edit: i phrased the timing incorrectly, so allow me to clarify. breakout in 18 +/- 9 hours.

of course, i do also see a possible larger consolidation pattern that would coincide with the OP's claim of staying within the range until about Monday, but my model is predicting something a little messier than that.

[abednego]

By reading the forum and some responses it sounds like a lot of people trade short term setups.  I should note that by "swing" trading I mean setups on the 2 Hour/4 Hour that will become Daily/Weekly plays.  In the regular markets that is the only best way to succeed.  I do not see the 1 hour>below with Bitcoin being very effective for profitable trading.  Disclaimer: I've still got "long term" positions since 2011.  They are based on the Weekly.

If the 5th wave was the retest of the highs, how are we still bullish?

Are we back to Wave #1?

I don't really get your wave counts either.

That is because I don't count waves.  Counting becomes too arbitrary.  Elliot Wave Theory is just that.  One should understand it's concepts but not trade based solely on it.  

What we can all agree upon is that mid-October Bitcoin experienced a MAJOR trend.  In December; a pullback.  Price is now in the next wave of the trend.

So the best time to buy looks like Thurs/Fri/Sat on average since they have a low probability of it closing up since 1/1/2013.

Thanks for the info and data, sir.

You're welcome.  Let me caution you to be careful if you implement this probability.  Remember those statistics are biased by the +6100% move.

we're consolidating very bullishly in an ascending triangle formation just below $850 right now on stamp, and my calculations anticipate a breakout within the next 18 hours, give or take [edit: in 18 +/- 9 hours]. we still have a lot of volatility to work through after the panic selling we saw yesterday, so i'd be surprised if we stay within that range until Monday.

What's a panic?  That's not really in my vocabulary.  I see a healthy pullback within the price action.

Breakout up or down?

If price hits around $750; down to the next support.

nothing's for sure, of course, but my money's on up.

edit: i phrased the timing incorrectly, so allow me to clarify. breakout in 18 +/- 9 hours.

of course, i do also see a possible larger consolidation pattern that would coincide with the OP's claim of staying within the range until about Monday, but my model is predicting something a little messier than that.

Glad we see the same.  My trading strategies mix price and time and so I also think a consolidation is likely.  That's what is great about trading; multiple strategies can tell the same story.  \

I don't trade within consolidations so my plan is to stay OUT with my trading capital until I see a setup that I like.