News from the FODL Coin Development team on May 30, 2022
Summary of market movements, w/c 23 May 2022
Following up on last week’s market recap… (please read that if you want to make sense of this one)
The relief bounce for equities DID indeed come, as the “whispering winds” had predicted, as clearly nothing new or catastrophic came from the FOMC meeting minutes release.
Thus, the S&P 500 and the Nasdaq rallied as did most of the TradFi instruments for a much-anticipated relief bounce, after what seemed like a relentless month of selling pressure.
Many traders immediately noticed that Bitcoin, did not bounce with TradFi, and in fact, it dropped by around 5% while the S&P + Nasdaq had a 10% markup, smashing through resistance levels printed earlier in the month.
This resulted in most CryptoTwitter “traders” calling for the end of the Correlation between our King of Crypto and the King & Queen of indices…
These discrepancies are often observed for short periods of time since the beginning of this correlation and are nothing unusual, especially in the lower time frames.
It often diverges on Long weekends such as this last one (Memorial Day in the USA today) or simply periods of low liquidity / High Volatility.
Now if you want to refer to last week’s market recap, I did mention, below the first chart (Fig.1), and I quote:
“This lower distribution boundary (around $28,000) is key for a potential bounce and perhaps the best opportunity to buy Bitcoin at the cheapest it has been since last August .”
Also just following that, I stated that due to my risk appetite + unclear bias, I probably wouldn’t be buying there, as I would much rather wait for a confirmation …
To which I added a 4H chart to illustrate what “confirmation” would look like for both a successful breakout or just a deviation.
Well, the price DID indeed test $28,000, not once but twice, with the deeper breakout from the range on Thursday and then a subsequent retest on Friday, followed by today’s visit to the opposite side of the range… as seen on the following chart.
So let’s dive deeper into a lower time frame chart so we can see the dynamics explained in the previous market recap, where I explained the different possibilities for a Deviation or successful breakout and to see if there was an actionable Trade and if the scenarios presented did play out.
Well as you can see in the 30M chart above (Fig.3), the first breakout from the range was immediately bought up and the price returned straight back inside the range, thus hinting at a deviation set up, it then tested equilibrium (EQ = middle of range) and returned to range lows where it deviated slightly again but quickly regained range lows boundary, thus confirming the Deviation yet again . This was the LONG signal that I posted last week, shown in Fig.1 as the furthest set up on the right in that image…
If you took that, well done, you should now be seeing a very positive PnL on your screen as we smashed through the whole range to firm up the balance by visiting the opposite side.
If you didn’t take the trade, hope you observed the dynamics and that this helps you in further setups in the future.
So where are we now and what can we expect?
As we advance into June
Well, leading into this week, the strategy at the top of the range in Fig.1, now applies!
Will we see a successful breakout from the range, or merely a deviation above?
There are a few key levels that we are watching for either continuation upwards or if Bitcoin falls back inside this tight range between $28,5k and $31k
There is a very dense area of confluence that is likely to cause resistance , should we continue higher above the range highs at $31k
These areas of confluence are :
Weekly level
Monthly Vwap for May (although this will be reset at midnight tonight as June starts)
VAH (Value Area High) of the week ending on May 15th
Edge of High Volume Balance area
These factors make for a strong case to short BTC around $32,000, at least on the first touch of resistance levels above, but be mindful that due to the speed at which we broke down from previous balance ($37,7k), the area above that resistance is thin in volume and as such if price does indeed break out, it will likely teleport to previous balance violently and with acceleration.
So exercise caution and good risk management if you are indeed shorting it.
As you can see, merely breaking out of the range does not invalidate the short setup.
A clear break above the areas of resistance is the confirmation that we are indeed going up.
However, failure to reclaim that level and subsequently falling back inside the current range means that we will remain range-bound and potentially break to new lows, as it signals lackluster strength moving into the new Month.
So let's see what the next few days bring us, moving into a new month and if the Bulls have the strength to have us retest higher levels, or if the Bears are setting up their next line of defense just above the current price.
There is no point in trying to predict market direction at present time, and your efforts are better deployed in identifying key levels so we can trade level to level and with good risk management.
If you are interested in learning more about how we are trading this environment and how we plan for the next setup, please join our free Discord group where we also share TA updates throughout the day and TA update LIVESTREAMS 3 times a week.
In the meantime, trade smart and protect your capital.
Peace, Baz
The FODL Factor
For more information and access to free educational content join our Discord and don’t forget to check out https://FODL.finance for decentralized trading with 0 funding rates, trading competitions, and more!
Disclaimer: This article is not trading or investment advice. The above article is for informational and educational purposes only. Please do your own research before purchasing or investing in any cryptocurrency or digital asset.
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