BTC Swing Zones – a new perspective
A few days ago, I posted three different zones on bitcoin where I am looking for potential swing trades. You can read that post here. At this point, we have not seen any of the zones mentioned in that post tested yet. As time passes, some levels change and become more prominent (this is especially true for levels related to volume profile). My perspective has also changed slightly. Right now, I would actually prefer to see my most recent idea play out. Let's take a closer look.
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Four Trading Zones for Bitcoin
Below, you will see a snip of my four different trading ideas. The first three are exactly the same as the ones highlighted in the previous post. Number four (the one highlighted in green) is my latest addition, and this is probably the setup I would feel most confident with at this point.
Let's hide the first three ideas and get some actual levels on the latest idea. See the snip below for a visual representation of the 4-hour chart. Specifically, I am looking for a move up to the zone of 21,680 to 22,100, where I am looking for a possible short trade. For this drop, my target would be the 16,750 – 17,200 zone. Here I will look for a long trade with no specific upside target (for now).
Below you can see a snip with long and short positions posted on the chart. Note that I will not preset any limit orders on these levels. I will wait for the price to come into these zones and then wait for the price to show some signs of a possible reversal. It is very likely we will see price burst through these levels, with no sign of support and resistance. Ideally, I would like to see a wick through on a drop in open interest and then a move in the opposite direction with an increase in open interest and volume. This will be my primary sign for potential trades to be executed.
Let's look at why I believe these zones could act as solid levels of support and resistance. If we zoom out to the daily chart, we can see that we are very close to the inflection point of, arguably, the two most important (read; obvious) trendlines on the chart. A break of the ascending trendline will make many traders extremely bearish, while a break of the descending trendline will make traders very bullish. It is no secret that the more obvious a technical setup is, the more likely it is to fail. Because of this, I think a break of the descending trendline will likely “fail” and give us a move down.
The next obvious question is, where should our target be for a possible short trade to fade the break of the descending trendline? Let's zoom in and see why I believe the 21,650 – 22,100 zone may be the place to get into a short trade. If you look at the snip below, we can see a weekly level of resistance at 21,827.
Now, if we pull a Fibonacci retracement from the swing high at 22,813 and down to the most recent swing low at 18,094, we can see the 0.786 retracement level is placed right on top of our weekly level of resistance.
In addition to the confluences above, we also have a naked point of control placed at 21,725, which is just slightly below the weekly level and the 0.786 Fibonacci retracement level.
Finally, if we pull a fixed range volume profile from June 14th and up until today, we can see there is a significant drop in volume just slightly below the value area high for the range at 21,957. This is another critical level that we should expect will act as a strong resistance level.
As you can tell from all the levels mentioned above, this zone is clearly a place with many levels of confluence that are likely to act as resistance, and because of this, definitely, a solid place to look for a short trade to fade the break of the trendline. That said, there is a chance that bitcoin will simply burst through this level with no sign of resistance. I think this is more likely if we are to see a liquidity grab below the swing low at 17,570 first. But even without that, there is still a chance that the mentioned zone won't hold as support. Because of this, it is of paramount importance to be patient when BTC is trading into this zone. Pay attention to the volume and open interest. Is open interest increasing when bitcoin is trading into this zone? Is volume increasing? If so, the breakout may be strong enough for further continuation to the upside. But if we see a break of the descending trendline on low volume and a decrease in open interest, I will definitely be looking for a short trade to fade the move.
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