has bounced back from yesterday’s sell-off and is trading around the $ 31,200 level at the time of writing. Still, the digital currency is down 27% from Jan. 8, hitting an all-time high of over $ 41,000. So is this a buy dip?
Not according to Scott Minerd, Guggenheim’s chief investment officer. The investment bank’s CIO notes, “Right now, the reality of institutional demand that would support a price of $ 35,000 or even a price of $ 30,000 is simply not there.”
Minerd may be right that smart money investors aren’t crypto fans, but he probably doesn’t consider the emerging “young money,” teenage investors whom CNBC’s Jim Cramer believes is changing the character of the market as a whole have driven the market.
Some would point to the current Reddit-powered GameStop (NYSE 🙂 craze to prove that young investors, working with friends and family members of retail investors, are actually changing the way things are done on Wall Street. Investors bound by social media guidelines may not yet have the upper hand, however, especially as institutional money – with its deeper pockets and broader clout – figures out how to deal with the current situation. Or the end will end in a crash, and in all likelihood some retailers will be left with the sack clearly emptied.
Our reading of the Bitcoin diagram is also higher, regardless of Minerd’s assessment. Technical data signals that the digital token is headed for the $ 50,000 mark. Whether because zero interest rates and massive impulses will weaken the dollar, or because a stock market crash could benefit Bitcoin as a safe haven, or because young traders will continue to bid on it, or just because it might turn out that this is actually a problem to buy Dip.
The current decline is overloaded. This happens when there is an area where both buy and sell orders are crowded. The fact that the tilt is down is a sign of profit taking after an increase, which has certainly occurred.
This is actually healthy for the asset. The entire dead weight is cut off and the slimmer rest is ready for another jump.
In other words, the likelihood of a decline is less since anyone who wanted to get out is already gone. That means anyone who gets in now will stay and help slide and pull the crypto into the next leg.
This dynamic triggers a chain reaction that creates its own dynamic and drives prices up. The expectation in such a setup is that the price will at least repeat its previous move.
While we could have measured the movement from the December 11th lows of $ 16,528 and could have provided a movement prediction of $ 23,000 from the breakout point, here we are working with the most conservative and sharpest move straight up from January 4th without a break went low of $ 29,178.
This gives an expected move of $ 12,438 from the time of the breakout.
However, caution is advised. The pattern is only complete after a decisive upward breakout, which can be interpreted by yourself. The more conservative a trader is, the greater the penetration and validation they will seek.
Conservative traders should wait for an upside breakout to overtake the all-time high and then wait for a pullback to retest the integrity of the pattern before going long.
Moderate traders would leave long after an upside breakout with at least one clear, long green candle followed by a retreat for better entry, if not additional confirmation.
Aggressive traders could take a contrary long position now, but only if they understand and accept the risk of trading ahead of time to beat the crowd and have a tight trading plan to which they are committed.
Here is an example of a coherent plan:
- Admission: $ 30,000
- Stop loss: $ 29,000
- Risk: $ 1,000
- Goal: $ 40,000
- Reward: $ 10,000
- Risk: Reward Ratio: 1:10
Editor’s note: This is just a trade sample. It doesn’t necessarily have to represent the market for which the analysis is in the main body of the post. Either the sample or the analysis – or both – could be wrong. We don’t know what’s going to happen next, just discussing possibilities based on what generally happens when such a dynamic occurs. Your budget, timing, and temperament will all affect your trading. Learn how to create a plan that suits your needs. Until then, keep your trades small.