In this week’s technical analysis, we tackle Bitcoin and Ethereum’s long-term trading zones.
For many experienced traders, not trading is just as important as trading; whereas for novices and new-comers, there’s the mistaken perception that traders always a need to be in the market all the time.
Our range trade setups from prior weeks are still in play, and recently our long at ~$6200 USD activated yesterday. However, after recording the lowest Bitcoin volume week on Bitfinex since July 2017, it’s time to take a step back and review possible trading opportunities on a longer time frame. Not only is it prudent to reflect on one’s long-term broader risk-profile for being in or out of the market, but planning is conducive to less emotional trading.
Looking at higher time-frames positions, I use Volume Profile or VPVR (Volume Profile Visible Range) to assist in marking out key zones of possible support and resistance zones. Volume Profile essentially displays historical trading activity at certain price levels. I also like to use Yearly Pivots and support and resistance breakout levels. Importantly, one must use confluence with other indicators or price action to arrive at high probability trading opportunity.
We see that the $6000 USD zone has become a magnet for price, showing high trading activity in this Support Zone 1. If we were to bullishly bounce at these levels, our targets would be the logarithmic bear trendline at ~$7100 USD, then at the multiple Resistance levels (Red Boxes) that have served as resistance throughout this year on increasing volume (see VPVR on chart). The Yearly Pivot at ~$11500 USD would be a major resistance level to short or bank long profits.
Conversely, should price break below $6000 USD, we’re looking at multiple support zones that line up with VPVR levels and historical resistance/breakout levels on bitcoin. Support zone 2 (~$4500) would line up with the bullish trendline we had throughout 2016 and 2017, so a high-probability trade exists at this level. Should we breach Support Zone 2, the next support to look for is the yearly S1 pivot (~$3000 USD), which also correlates with a prior VPVR activity zone and resistance/breakout level on Bitcoin. Lastly, Support Zone 4 is essentially the retest of the 2013 high of ~$1200 USD, so it should act as the strongest support zone should we reach that low. Importantly, should these support zones become invalidated, they most likely will act as resistance on any retest and further price action.
Moving to Ethereum, we can see, like Bitcoin, it entered its first key support zone 1, between $200 USD and $140 USD. Should support not hold at $140 USD, would bring us to the $100 USD and $80 USD range, and finally the $50-$40 USD range. VPVR at the $100- $80 USD range is a bit of a concern in terms of comparative historical price activity there being relatively low, so should this level not hold, a retest of $50 is likely. If any of these supports do fail, expect them to act as resistance for future price action. Should we bounce from these current prices, I expect initial resistance at $300, larger resistance at $380-$400 USD and then major resistance at $500 USD.
These sorts of longer-term trading plans help make trading decisions for an unknown future. It’s not about correctly predicting where price will go, but about having a plan and being prepared for the most probable eventuality playing out.