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Analysis

Bitcoin & Ethereum: Trading the News Versus Trading the Charts

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The past few days have been tumultuous to say the least.  As you may have guessed, I have been receiving lots of emails and commentary.  There is a recurrent theme I would like to address.  We won’t hope to solve the debate here, but there has been an on-going debate for a very long time between trading by the news or by the charts.  Which is better?

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Let me state up front that I don’t have the slightest interest in which style or method other traders take.  If it works, I might want to study it.  (Some people probably have a way to make money by reading tarot cards.  If it works, I am happy for you…)  But as for me, I don’t really care all that much about the “news”.   To re-phrase, I care from an intellectual point of view – I like to know what is going on.  But I purposely try not to let “news” dictate my trading.

I actually received a humorous email from a rather opinionated trader telling me that the news cycle was too strong for an asset to fall to levels I had publicly suggested.  I almost smiled when that particular coin fell significantly below that forecasted level just a few days later.  Believe it or not, the charts don’t care about the news or the sentiment.  For some esoteric reason I can hardly even guess at, the charts forecast the news.

If one scours the journals every day, for hours on end, they will encounter 1,000 reasons to be bearish, and another 1,000 reasons to be bullish.  Plus, the news often has an agenda.  Press reports and other news events are often designed to push assets in the upward direction.  I receive press reports regularly in my inbox, and almost never get one that has a bearish tilt to it.  That’s OK, I get it.

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I want to focus on the Monday morning ETH massacre as a recent example.  It was a wipe-out that bankrupted many ETH traders.  That is a given.  After my column on the event, which I tried to get up on the site as soon as I could when I saw the action starting to unfold, I received a plethora of mails suggesting that it was a non-event.  It was a news event. It had nothing to do with trading.  A simple glitch in software, a DDoS, or something else.  All that may be true.  But none of that makes any difference to the traders who lost their trading accounts, I am sure.

The charts are multi-faceted and hard to read, particularly when you are trying to follow more than 2-3 of them.  BUT THEY DON’T LIE.  They almost always give a warning before they react in a big way.  Sometimes we see the warnings and sometimes we don’t see them until after the fact, when we know to look a little closer.

Mind you, I am not trying to convince readers to believe as I do.  I am just trying to explain why I don’t care about the news, when I am trading.  In fact I try very hard to not let news influence my thinking.

Let’s finish the segment by looking at the massacre a bit closer, now that we know a significant event has occurred.

Looking at the 3 hour ETH chart above, we can see the warnings were there.  Note the red arrow indicating that pricetime had reversed at the top of the square, while inside an arc pair, where “anything can happen”.  That was a sell signal.  Had we traded this chart we would have been out of this coin at ~ $96.  (The next buy signal was to be when pricetime closes above the arc pair, but that has not yet happened.)  More importantly, note the blue arrow.  That is where the collapse occurred.  Note that the DDoS (or whatever it was) happened EXACTLY at the end of the square.  This is where reversals often happen.  Had we been focused exclusively on this chart, we would have known to be very careful at that time.

In closing, note that an energy point approaches (pink line).  I will watch that candle closely to see if the arc above it yields (I suspect it will).  If so, a trading opportunity may be approaching.

 

Remember:  The author is a trader who is subject to all manner of error in judgment.  Do your own research, and be prepared to take full responsibility for your own trades.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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4 Comments

4 Comments

  1. Gabriel

    May 10, 2017 at 7:33 am

    Thank you for your insightful work Jim.
    Personally, what I learned from the massacre on alt coins was that you should always buy as low as possible. That way, even if the price looses 30%, it might still be above your initial buy, so there are not reasons to panic.

  2. foryou

    May 10, 2017 at 11:59 am

    Hy Jim,

    This is insightful, appreciate it!

    However, it has been sometime since you a gave a recommendations for BUYs. I thought you would at least suggest something today; waiting.

    Thanks

    • Jim Fredrickson

      May 10, 2017 at 1:07 pm

      I am heavily invested in XLM and XRP. However, almost all the major altcoins are great buys right here, right now. I’ll write more soon…

  3. Joshnj82

    May 10, 2017 at 12:58 pm

    I’m not Jim (not even close) but I’m long on a few pairs with plenty of room for buyers to still jump in. However, this is just my hopeful and probably biased opinion. Good luck and hope the market gods are in a good mood today.

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Analysis

Long-Term Cryptocurrency Analysis: Bitcoin Flirts with $8000 as Altcoin Bull Persists

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Bitcoin’s swift recovery was the main topic of the week, as the most valuable coin not just regained its steep losses, but hit a marginal new high towards the end of the period. The entire segment is experiencing capital inflows as the total value of the coins climbed above $230 billion for the first time ever after finally leaving the vicinity of the $200 billion mark.

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BTC breached the $8000 level before turning slightly lower on Friday, but despite the severely overbought daily chart, it is still trading near its all-time highs. As the long-term picture still suggests a deeper correction, investors should wait with opening new positions and traders should also control position sizes here. Key support levels are found at $7700, $7000, and $6700, while the recent key break-out level at $5000 still hasn’t been re-tested.

BTC/USD, Daily Chart Analysis

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Dash is still the most bullish altcoin from a technical standpoint, despite this week’s short-term correction, as the coin is trading above its prior all-time high, and this weekend, it looks ready to test the break-out high near $500. Support levels are still found at $400, $360, and $330, and as the long-term picture is approaching overbought territory, investors should only hold on to their positions here.

DASH/USD, Daily Chart Analysis

The other major altcoins are also mostly in bullish setups, with some of them already in the latter stages of this cycle, like Monero and IOTA, but elsewhere in the segment, there are still opportunities for both traders and investors. Let’s see the detailed long-term view.

(more…)

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Analysis

Technical Analysis: Litecoin and NEO Jump as Bitcoin Trades near $8000

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The cryptocurrency segment continued its bullish run, as the total value of the coins climbed above $230 billion for the first time ever, while Bitcoin also posted marginal new highs. The most valuable currency is still overbought regarding the long-term picture, and we continue to expect a deeper correction in the coming period, despite the recent strong rally. Support levels are still found $7700, $7000, and $6700 while the $8000 level is ahead as a major obstacle.

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BTC/USD, 4-Hour Chart Analysis

Litecoin has been the most active major besides Bitcoin, as it rallied strongly after breaking out above the key $64 resistance and it breached the next target at $75 before heading below $70 again. The coin remains in bullish long- and short-term patterns, and we expect a move above the major resistance zone ahead with the next target found at $82.50.

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Litecoin/USD, 4-Hour Chart Analysis

NEO is showing strength in the second half of the session, while Monero is recovering well from a short-term dip, similarly to IOTA and Ethereum Classic. Ethereum continues to represent stability in the segment, while Ripple failed to build up momentum so far after yesterdays spike higher. With still most of the altcoins being in bullish setups, let’s see the short-term charts.

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Analysis

XRP Looking to Make a Significant Rally

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The XRP/USD pair went into a deep correction after hitting 0.29490 a month ago. It nosedived to the major support level of 0.19052. The pair consolidated for a few weeks which gave the market the legs to test resistance at 0.22924.

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Technical indicators show that the pair was ready to breach its immediate resistance, which it did this morning. Now that resistance has broke at 0.22924, it’s time to buy. This successful breakout will take the pair to 0.23997 first and 0.26563 next before hitting the target of 0.26796 which is coincidentally a major resistance level.

Technical indicators hint that the market would most likely be overbought by the time it hits 0.26796. Should it respect the major resistance level, the likelihood of the market turning extremely bearish increases. Therefore, it is recommended to closely watch your trail stops to preserve your gains.  

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Summary of Strategy

Buy: As close to 0.22924

Support: 0.22224 and 0.20081

Target: 0.26796

Stop: If the market breaches 0.20081 as next reliable support is 0.19052

 

Disclaimer: The writer owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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