BTC/USD Forex Signal: Plummet from All-Time High Above $42K

Adam Lemon

The high volatility and seeming blow-off climax makes Bitcoin somewhat dangerous to trade right now.

Last Wednesday’s signals were not triggered, as there was no bullish price action when the support level identified at $34,512 was first reached.

Today’s BTC/USD Signals

Risk 0.50% per trade.

Trades may only be entered before 5pm Tokyo time Tuesday.

Long Trade Ideas

  • Long entry after a bullish price action reversal on the H1 time frame following the next touch of $32,500 or $30,043.

  • Put the stop loss $100 below the local swing low.

  • Adjust the stop loss to break even once the trade is $100 in profit by price.

  • Remove 50% of the position as profit when the trade is $100 in profit by price and leave the remainder of the position to ride.

Short Trade Ideas

  • Short entry after a bearish price action reversal on the H1 time frame following the next touch of $35,896, $37,353, $39,012, or $40,033.

  • Put the stop loss $100 above the local swing high.

  • Adjust the stop loss to break even once the trade is $100 in profit by price.

  • Remove 50% of the position as profit when the trade is $100 in profit by price and leave the remainder of the position to ride.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

BTC/USD Analysis

I wrote last Wednesday that although volatility remained relatively very high, there were no clear signs of climax and exhaustion, so as we were trading into the blue sky of all-time highs, there was no reason not to take a bullish bias here.

I also said that bulls should beware of a climax if the price quickly reached the major round number at $40,000.

This was an excellent call, as the price continued to rise by another $7,000 or so before appearing to climax on very high volatility a little way above the all-time high near $42,000.

Volatility is very high, and the sharp drop we have seen over just the past couple of days with a near-25% fall in value suggests that we have just seen the highest price that Bitcoin will make for a while.

Despite the sharp fall, we are seeing Bitcoin recover over the past few hours after finding support at the key round number of $32,500.

The high volatility and seeming blow-off climax makes Bitcoin somewhat dangerous to trade right now.

The key thing to watch for today is whether the nearest new resistance level at $35,896 will hold – if it does, that will be further evidence that we have a bearish climax.

It might be wise to step aside from trading Bitcoin today, as I think we are unlikely to see the price reach a new high for several weeks, months, or even years.

Bitcoin is likely to consolidate or fall to new lows, but arguably can be bought if a tight stop can be placed technically from either $32,500 or $30,000 – or very close to these levels.

BTC/USD chart

There is nothing of high importance scheduled today concerning the USD.

Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy

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