CryptocurrencyInvesting

How To Swing Trade The Wild Cryptocurrency Markets

By November 8, 2017 No Comments
Successful swing trading takes an astonishing level of psychological fortitude. In the wild cryptocurrency markets it can feel like being suspended over a massive void alone.

Successful swing trading takes an astonishing level of psychological fortitude. In the wild cryptocurrency markets it can feel like being suspended over a massive void, completely alone.

Disclaimer:  The information in this blog represents the opinions of its author and is for educational purposes only.  It is not intended as investment advice.  The bitcoin market is extremely risky so you should only invest money you are willing to lose.

Bitcoin Obituaries Are Premature

It seems like bitcoin's obituary is written every time it hits a new high.  As bitcoin continued to crush new high after new high over the past week, we heard talk of bull market exhaustion, double tops, doji reversal candle patterns, and bearish indicator divergence

Even the big players on wall street started weighing in with price targets.  Goldman Sachs technical analyst Sheba Jafari predicted an advance to $8000 followed by a consolidation.

It seems like every time bitcoin hits a new high, somebody is writing its obituary.  These obituaries always turn out to be premature.

It seems like every time bitcoin hits a new high, somebody is writing about its impending death. These obituaries always turn out to be premature.

Our Recent Killer Swing Trade

Swing trading is not about predicting where the market will go but rather listening to what the market is telling you.  In our blog post on November 5th, after a slight retracement from the new highs, we said "since this retracement was a very shallow one, don't get spooked by a deeper pullback into the zone between the 50% and 38% Fibonacci levels ($6738 - $6906), before the next leg up." Here is the chart exactly as it appeared in that post:

Bitcoin continues it's relentless drive toward 10x in 2017.  After the rapid price advance from interim lows of $6028 to $7449, it barely paused for a 38% retracement before advancing to new highs near $7500

Bitcoin continues its relentless drive toward 10x in 2017. After the rapid price advance from interim lows of $6028 to $7449, it barely paused for a 38% retracement before advancing to new highs near $7500. chart:coinigy.com, technical analysis: digitalassetuniversity.com

We also said:  "Discord over the SegWit2x fork may cause a few hiccups along the way but we maintain our short-term target of $8543, with a projection of $10,000 bitcoin by year-end".

Both of those predictions turned out be astonishingly prescient.  Here's our Facebook post from this morning before the cancellation of SegWit2x.  It shows a perfect example of how to trade a price swing, in this case a 38.2% Fibonacci retracement, in a smoking-hot bull market.

KABOOM! Nailed it! In our Nov. 5th blog post, we predicted the 38.2% pullback precisely. If you had bought bitcoin in the zone we predicted, you'd have profited from a $600 move in less than 48 hours. That's almost 9% - the kind of returns you'd wait a year for in the stock market!  Chart: coinigy.com, technical analysis: digitalassetuniversity.com

KABOOM! Nailed it! In our Nov. 5th blog post, we predicted the 38.2% pullback precisely. If you had bought bitcoin in the zone we predicted, you'd have profited from a $600 move in less than 48 hours. That's almost 9% - the kind of returns you'd wait a year for in the stock market! Chart: coinigy.com, technical analysis: digitalassetuniversity.com

A Little Too Confident?

A sharp bounce off a 38.2% retracement is an indication of a very confident bull market, and it's a great setup for a low-risk, high-probability entry point.  When you see this type of bounce within a long-term powerful uptrend the market is screaming: "jump on board".

Cold, Rational, Technical Analysis

So when price pulled back to $6900, just barely entering our target zone below $6906, and bounced right back up, I was thinking: "WTF?" - this market is wayyyyyy too confident for the upcoming SegWit2x fork, especially with all the press reports about discord in the bitcoin community.  This is a great example of how sometimes future events can be priced into the market and cold, rational, mathematical, technical analysis can be used to tease them out.

Like Brazilian Coffee

It's kind of like when it's cold in Brazil, coffee prices start rising and momentum in the market builds before the freeze.  Then when it freezes, the price spikes and goes crazy.   This is what happened today in the bitcoin market.

The confidence that discord within the community would prevent the hard fork was probably at least partly priced into the market as it was trading comfortably in the $7500 zone when the news broke that the SegWit2x fork was suspended for lack of consensus.

Volatility As Predicted

When the news broke that the hard fork was off, bitcoin price went on a wild ride - first up to $7900 in less than an hour then down to $7150 in the next 3 hours.  When the dust settled, it was trading around $7300.

At noon on November 8th, SegWit2x was called off, and bitcoin price imediately spiked to $7900, then dropped to $7150 within 3 hours.  When the dust settled it was trading around $7300.  chart: coinigy.com, technical analysis: digitalassetuniversity.com

At noon on November 8th, the SegWit2x fork was called off, and bitcoin price imediately spiked to $7900, then dropped to $7150 within 3 hours. When the dust settled it was trading around $7300. chart: coinigy.com, technical analysis: digitalassetuniversity.com

Where Is Price Headed?

The smartest swing-trading strategy in an uncertain or volatile market is to wait for a bounce off a major support level followed by a pattern of a higher low and a higher high before adding to your position.  We still see major support at $6906 and $6738, with our short-term price target of $8543 still intact.

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