The Three Zones to Trade Bitcoin

As highlighted in the post yesterday, there are currently three zones where I am looking for possible swing trades on bitcoin. Note that I am taking trades in between these levels, but these are more short-term based, where I have tight stop losses and lock in profits swiftly when possible. But what are the reasons behind the three zones highlighted yesterday? It is all based on technical analysis and, more specifically, confluence of crucial levels. Let's take a closer look

Zone one: 17,200 – 16,700

This is my preferred zone to look for a possible long trade. There are multiple reasons for this. First of all, we got a daily support level at 17,147. These daily levels tend to act as strong levels of support and resistance.

In addition to this, we got liquidity below the recent swing low at 17,567. Because of this, it is very likely we will see a drop below this level, liquidity being grabbed, followed by a solid move to the upside. Note that there is a 400 USD difference between the liquidity and daily levels, but we often see price go through a liquidity by close to this amount, just to return and go back above it.

We also have two 0.236 Fibonacci extension levels aligning up just slightly below the daily level. Specifically, these are located at 16,868 and 16,976. These are the fib. Extension for the swing high at 22,810 to 18,090, and the other from the anchor level at 25,211 to 18,461.

Finally, we got the channel low precisely on top of all the other key levels mentioned above. While its common practice to buy or sell a breakout of a channel, I prefer to buy the low and sell the high of a channel.

Now lets make all the key levels mentioned above visible, and we get the following view.

This does, without a doubt, look like an excellent place to look for a long entry. I love the idea of taking the swing low at 17,500, making retail traders bearish, and entering short trades on a break of the recent swing low, just to take it back above the level and then have a strong move the upside. The only issue I have with this potential setup is that it is too obvious. If a setup is too obvious and we get too many traders expecting a move to the upside, there may be more liquidity to allow for further downside. We must keep this in mind and remember that anything can happen. Because of this, I will not place a limit order to go long as soon as the mentioned level is hit. I would like to see a drop to this level, with a decline in open interest and high volume, followed by a move up with an increase in open interest and high volume. If this happens, I will definitely look for a possible long trade.

Zone Two: 14,900 – 13,900

Should we get a drop in the price of BTCUSD, and cut right through the price zone mentioned above without any sign of support, this is the next zone where I am looking for a possible long trade. The main reason for this is the inner trendline starting from the low of the daily candle on May 19th, 2021 and connected to the low of the daily candle on June 22nd. 2021. Inner trendlines often act as strong support and resistance levels, and this is far less obvious than all the confluence levels listed above. What I do not like about this is that we do not have any confluence with other vital levels. In an ideal world, we want to have confluence of many fundamental levels, but the zone should not be an obvious level as this will draw too much attention. That said, this is still a solid level where I will be looking for a possible long trade.

Zone Three: 20,950 – 21,550

The third and final level where I am looking for a possible trade is around the 21,000 to 21,600 zone. Here I am looking for a possible short trade.

First of all, we got the anchored VWAP from the swing low at 17,600. Anchored VWAP from major swing points tends to act as strong support and resistance.

Secondly, we got two key Fibonacci retracement levels here. We got the golden pocket from the swing high at 22,800 to the most recent swing low at 18,100. We also got the 0.382 retracements from the prior swing high at 25,200 to the swing low at 18,470. These two are basically stacked on top of each other, making this a key fib. retracement zone.

This is probably the zone I am most skeptical about but should the price come up here before making a new low, this is definitely a place where I will look for a possible short trade.