Weekly Review: Too Close to the Sun

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May 31, 2019 Welcome to the weekly edition of the CoinDesk Markets newsletter! Every Friday we will review our cryptocurrency price predictions posted during the week via CoinDesk Markets Twitter  or our private room on StockTwits, the CoinDesk Dojo.  "Trades You Missed" will feature our favorite trade ideas or technical analysis insights that accomplished impressive gains, where as "Trades We Missed" will feature those that took a turn for the worse. Wins and losses are both part of the trading game, so we hope you will learn how to replicate our successes and minimize losses!   BTC Flies too Close to the Sun  BTC/USD: Price: $8,359 | MCAP: $148.2 billion | Maximum Gain: 4.1% for triangle breakout and 7.9% for wedge breakdown. Why we were intrigued:   On Thursday, multiple technical price patterns came into play that created a bullish short term outlook with a bearish longer term view.   On the lower time frames, bitcoin’s price was forming an ascending triangle pattern, which typically resolves as a bullish continuation pattern that can be described as having a flat top and up-sloping bottom trendline.   Psychologically it makes sense for the pattern to be bullish in nature since each consecutive rejection ultimately gets weaker, creating a series of higher lows until the flat resistance is tested so many times that price finally is able to break through.   With triangles, a measured move can be created by adding the base range of the triangle to the breakout point, which gave us a rough target of $9,070 and also aligned with the boundary of a larger bearish price pattern, the rising wedge.   Indeed, bitcoin’s price broke out from the triangle moments after the post and climbed all the way to $9,090 (Coinbase) before rejecting harshly from the rising wedge resistance followed by a more than $500 drop.   With the focus now on the rising wedge, bitcoin’s price needed to respect the pattern’s rising support or else a bearish reversal was likely going to take effect as the pattern traditionally suggests.   Unfortunately for the bulls, the sell pressure was too strong resulting in a downside breakout of the wedge, inciting a more than $1,000 sell-off from the day’s high.   Looking ahead, the long term view on bitcoin’s price is still bullish while it trades comfortably above the 200-day moving average, but the near term view is in favor of the bears with a measured move of the wedge breakdown located near $7,000.   The Trade The Result The Case for Active Management of Stop Loss BTC/USD: Price: $8,359 | MCAP: $148.2 billion | Maximum Loss: -1.35% Why we were intrigued:   Watching the cryptocurrency hit the stop loss and then rally hurts. That is often the case in the volatile cryptocurrency markets. Take for example the bullish trade idea on bitcoin shared by our analyst in CoinDesk Dojo on May 29. The leading cryptocurrency bounced up from the key support zone of $8,390-$8,500 on Wednesday, establishing a bullish higher low and strengthening the case for a rally to $9,000 first put forward by the pennant breakout – a bullish continuation pattern – on Sunday. To be on the safer side, the analyst recommended buying BTC above the daily high of $8,718 for a target of $9,000 and with stops below $8,600. BTC rallied to $9,000 in the US trading hours yesterday, but after hitting the stop loss in the Asian session. In summation, the bullish view was right, but the trade ended up in loss. So what went wrong? To start with, the stop loss was perfectly placed in the sense that it offered an attractive risk to reward ratio of $118:$300. Key support, however, was located at $8,500 (June 2018). Further, BTC had created a higher low at $8,420. So, there was always a risk of BTC shaking off weak hands by revising the key support levels before rising further. And that's what seems to have happened. Hence, seasoned traders often do not place a stop order and actively manage the trade. That, however, could prove risky, as the cryptocurrency markets are running 24/7 and things can change drastically overnight when a trader is sleeping. Hence, placing a stop order is advisable, unless you are a full time trader.   The Trade The Result   We're excited to announce the launch of the CoinDesk Dojo, a premium subscription part of StockTwits' recently announced Premium Rooms product. Ask the analysts—Omkar, Sam and Seb—questions about charts and talk with other traders looking to profit off the volatility of the crypto markets.  Create an account on StockTwits and then subscribe! Subscribe Here   Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments. Copyright © 2018 CoinDesk, All rights reserved.  Our mailing address is:  250 Park Avenue South New York, NY, 10003, US  Want to change how you receive these emails? 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