The Battle of Midway

Dear Readers,

In LGC terms, here we are midway in the channel. BTC price has shown much strength since the relatively recent lows, since the ‘buy zone’, yet we’re now left wondering whether it will push through to the top of the channel in a renewed manic market. Whereas on the longer-term time-frame [of the investor] we can have more confidence in price direction based on the LGC channel/ model, in the shorter-term we’re better off considering various scenarios especially given that price is currently at a pivotal point. What I refer to here is price continuing to hug the technical line of support that has held on the multi-month time-frame as follows.

What is of interest here [top chart] is the contrasting rates of ascent - whereas previously the moves are more parabolic, this move to the upside is not so parabolic and more of a technical nature. Also of a technical nature if the repeated testing of the line of resistance [at the midway level] leading to a pivotal point - will it break to the upside or break down into a consolidation pattern.

Given that technical analysis attempts to be objective as possible, given the shorter-term-analysis is largely descriptive [in contrast to the more predictive on the longer-term time-frame], and given that various contingencies should be entertained through a realistic lens, a chart considering a break downward should be sketched [A] besides a chart showing a continuation of the technicals currently being tested [B].

Two Shorter-Term Scenarios

A.

Given the technical nature of the move up, I think it reasonable to assume a correction of a technical nature - 38 to 50% of the ascent [if a consolidation is to indeed ensue]. Interestingly, such a consolidation would bring price back to the ‘buyzone’ as support. For those buying the ‘buyzone’ previously as a longer-term investment, there is nothing too problematic here. For those that bought BTC higher [or for those buying alts more speculatively in the expectation of BTC going yet higher], there may be some trying times ahead. Much here no doubt depends on one’s management of risk - the weighting of positions, the use of stops, and the tolerance toward letting some trades [or investments] go ‘under’ in the shorter term.

B.

The expectation here is for the trendline to hold with continued upside price action leading to a short term target just shy of 100K. If this technical move in turn saw the market move into a manic mode, then there’s the possibility of continued upside proce action until it reaches the upper range of the LGC. Of course, it is crunch time for this technical projection, with price currently testing it. If the line breaks on the weekly and monthly charts, then the consolidation of chart A comes to the fore. Also keep in mind that if that technical line breaks this should not entail a sudden ‘flip’ from bull to bear, but rather a shift in ‘weighting’, as on a spectrum, where that consolidation starts to become more likely [while never certain… price can always turn on a dime].

While at a tipping point, I think it fair to say that price has not yet tipped either way. These things take time, and so the monthly chart is the one to watch for confirmation one way or the other, where currently the uptrend is holding.

Further Context

Keep in mind that a battle is not a war. The longer-term war of investment consists of a series of ‘battles’ - as the saying goes, bull markets climb a wall of worry. And what exactly is this wall of worry? It’s the LGC [Logarithmic Growth Curve] in my opinion, something that should be the true focus of investment, where the interim spikes and consolidations can become distractions in this wider context. Of course, as far as the trader is concerned, they may look to more speculatively use those intermediate moves to their own advantage. Each to their own… or perhaps you could even be both.

A Summary Note on the ‘Battle’

Keep in mind that the battle is not really between bear and bull [the marketing fallacy], but is between you and the market. As a trader/ investor, you’re no doubt seeking to make an opportune profit while also seeking to remain invested to a certain extent for the longer-term. The market is simply a means to an end for you and not one to be overly emotionally engaged with [the animal spirits of bull and bear], to one side or the other.

My use of war imagery in this article was to make the point that trading/ investing in very speculative assets is indeed a battle, never a walk in the park. You’re going to get a bloody nose every now and then, even with a wider strategy in play, but don’t take this as a reason to beat yourself up. Strategy armours the mind.

I’ll adopt what I call the ‘layered approach’. The idea being that risk is increasingly managed at the lower layers with the upper layers then freed up for more speculative activity. If one were to dive straight into the upper layer, the riskiest one, without having the lower layers in place first, this would essentially just be the modus operandi of the gambler - a kind of hit and miss approach. With distinctions made between layers, we come again to the idea of a graduated spectrum. At the one end, we have the riskiest form - out and out gambling; and at the other, the least risky form - investing. Note that with investing, there is still some element of risk involved, though greatly reduced relative to gambling. Also note that trading is something distinct from both the extremes of gambling and investment, and can itself, lying as it does on a spectrum, be further sub-divided into riskier and less risky forms. As for gambling, I’ve nothing against it, I’m a speculator not a saint. However, there’s a vast difference between the visitor spending discretionary money they can afford to lose - picking it up and putting it down as a pastime - and the poor desperado caught in the casino’s clutch. Having defined the terms, let’s know look at the layers beginning with the least risky.

A strategy also practically aims for the survival of your trading account [never a binary ‘all in’ or ‘all out’, to cover risk to both sides] even when the tide has momentarily turned against your trades/ investments. This is the attrition and heat of battle, the realistic cost of being a market participant. While the cost should be tolerated even at the lowest ebb, reserves at your disposal should also be protected. Having realistic expectations to begin with will no doubt help you in this regard. Remember, if it were easy, you’d all too soon own half the world.

Until next time,

Stay, relatively, safe out there,

Dave the Wave.

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