March 28, 2024

Significant Resistance Test - White Paper February 9, 2022

This week in focusCredAnd DonAlt, smug boomers out Technical Roundup: continued growthBTC/USD in the direction of important resistance at ~$46 thousand and a retest of the breakout level in ETH/USD. The review ends with a detailed reminder of the basic principles of range trading.

https://coinmarketcap.com/coins/views/all/

Bitcoin is testing significant resistance

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Bitcoin is approaching the ~$45-47K area, marked by overlapping resistance levels on several higher time frames.

Just as the ~30-35K area had multiple support levels overlapping each other on various time frames, there is an overlapping of multiple resistance levels at ~$45-47K.

Specifically, $46-47 thousand.— this is the middle of the range on the monthly timeframe. In addition, this is the level of the weekly cluster and the point before the breakdown of support. Finally, the trend indicators we look at from time to time - the 21-week, 50-week and 200-day moving averages - are all in the $50K area.

This market is still trading in a range,until proven otherwise. At the time of writing, the market has rebounded from support and is approaching resistance. We have been optimistic at support and tend to be cautious at resistance.

The price movement was very unidirectional asoften happens with bitcoin: up, sideways, up, sideways, and so on, with pullbacks barely visible on the chart. Based on high timeframes, it is difficult to join such a trend, but it seems unreasonable to do it in conditions when the market is approaching resistance.

Even if this movement reaches its maximumrange ($56-60K), we believe that positioning for this move by buying below matching resistance levels on multiple timeframes is one of the least compelling ways to enter the market. At the very least, our base case scenario assumes some pullback, slowdown and haircut, since at these levels it is logical to expect some profit taking and risk reduction on the part of buyers.

As for the likely rollback, the dailythe structure is at $40.5K, and some overlap with the weekly at $38.2K. This area looks suitable for forming a larger low if the emerging trend continues.

As for the continuation of the impulse, then, as withany range, recovery above its midline suggests the likelihood of a move to the upper limit. At the time of writing, the $46-47k level remains resistance.

To summarize, it can be stated that the marketpushed away from the support and approached the resistance. The risk-return ratio here is unfavorable for opening new longs. If the momentum continues, that would be nice, but it hasn't happened yet. The prospect of a larger low in the $38-$40k area also looks reasonable. In our view, any of these potential trades make more sense than impatiently buying under resistance in anticipation of it being broken.

Retest $3000 in Ethereum

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The Ethereum/USD pair is retesting the middle of its trading range at $3050-3310. In terms of TA, everything here is very similar to BTC/USD.

In order not to retell the entire section again, the main idea is that the ETH/USD rate is at the resistance on higher timeframes.

In case of recovery above $3050-3310, the clear target level is $4000.

In the event of some pullback, the likely area fora larger low can be found at $2,700 on the daily time frame, however, the trend needs to be very strong to hold at this level. Otherwise, our attention is focused on the untested low of the range at $1900.

There is still nothing interesting in the pair against BTC: the resistance (₿0.077) has not been overcome, and the probability of forming a larger low looks more and more precarious.

We weren't attracted to trades near the middle of the range on the way down, and understandably we don't tend to take them on the way up.

Range Trading Principles

Of course, we have written about this in different words more than once, but perhaps it makes sense to expand this topic separately, given the current price behavior.

More important than any technical parametersanalysis or indicators, is to determine the mode in which the market is traded. Is it trending or in a range? Sounds simple (in fact, it is not), but without this foundation, it is difficult to build a consistent and adaptable trading system.

When the market is trading in a trend, you should proceedfrom a few basic assumptions. Let's take a clear uptrend as an example. Some of the principles can be formulated as follows. Breakouts are likely to be successfully contained in a retest. Local pullbacks are likely to be shallow. Support is more likely to work than not, resistance is the opposite. Holding longs until they hit (much) higher resistance levels is smart. Well, you get the point.

Many of these assumptions are irrelevant tomarkets trading in a range. Breakouts are less likely to be held in this mode. Local pullbacks are likely to be deeper. Supports and resistances work out with an equal degree of probability. There is no reason to hold positions above/below the expected profit-taking levels. Etc.

One way to lose money (or lose money) is to misunderstand the mode the market is in.

Trading as in a range when the market is intrend, you will almost always close trades too early, your picky pip limit orders will be less likely to work, and you will probably jump into a position more than once against the direction of momentum, the strength of which you underestimated.

Trading like a trend when the market is inrange, you will almost always close trades too late, enter the market at inopportune moments and, most likely, get burned more than once waiting for momentum that will not happen.

The list is not exhaustive.

All this to the fact that, not yet confirmedthe opposite, our base case is that the market is range bound. Range trading implies greater legibility when entering a position and conservatism in its management.

We are building our vision gradually, one level at a time, and the closest relevant price structure today is resistance in BTC/USD (~$47K) and ETH/USD ($3050-3310).

 

BitNews disclaim responsibility for anyinvestment recommendations that may be contained in this article. All the opinions expressed express exclusively the personal opinions of the author and the respondents. Any actions related to investments and trading on crypto markets involve the risk of losing the invested funds. Based on the data provided, you make investment decisions in a balanced, responsible manner and at your own risk.

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