Range High Resistance, Xmas Move Retraces

January 3, 2022

Trader Alec
THE LIQUIDITY ZONE

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Last week we made the case for going risk-off as BTC hit the range high, and this turned out to be pretty solid financial advice (which it definitely, totally, absolutely wasn’t!). As expected, the holiday move was best faded as price swept the range high and completely retraced the inefficient up move. Now, back at mid range, we ask the age old question: what do we do now?

Before getting to that, I just want to welcome any new readers and wish you all a happy new year. If you’ve found your way to this blog then it’s reasonable to suspect that you’re a serious, dedicated trader looking to make a run at this, and since misery loves company we’d love to have you join us over at the xB Legacy discord to learn more about the trading strategies discussed in this post: https://discord.gg/BWZZa5DSCu.

Ok, let’s jump into the charts.

It’s been my view since December 4th that the range low on BTC needs to be taken before putting faith in any sort of recovery, which is simply because V Shape reversals rarely occur after violent liquidation events. The inefficient nature of the down move means that there are a ton of sell orders that were missed on the way down, A.K.A very strong resistance. This is evidenced in the shallow sweep of the range high, which coincides perfectly with the low of a weekly liquidity gap.

Resistance in that weekly liquidity gap was so strong that price barely made entry before swiftly rejecting and printing a GOAT Liquidity Gap Reversal pattern. All recent bullish expansion has been met with swift punishment, which is again more reason to believe that price is ultimately headed to the range low.

Simply put, there’s a lot of work to be done before turning bullish. The good news, however, is that we have a very clear sign of strong bullish confirmation in the form of a close through this weekly liquidity gap. Strong resistance flipped support equals strong support, so if this level is claimed then it will be a very heavy buy signal. Until this happens, or the range low is taken, I’m bearish and will not be entering any spot positions.

Looking at ETH, which can be used roughly as a gauge of the alt market as a whole, completes the bearish picture.

Expansive down moves retraced by fairly efficient up moves. Not much more needs to be said.

OK, so spot obviously still isn’t the best option right now. Let’s zoom in.

This macro bearishness is ripe for taking advantage of on an intraday basis. Looking at the 4h we can see liquidity gaps being filled as a sign that bullish retracement has ended and that bearish expansion can continue.

I personally like to see a sweep for confluence, so you can use these 4h LG fills + sweeps to enter shorts.

Here’s a weekly recap of a few margin trades that I took. There’s a few reminders here that counter-trend longs can easily get chopped up.

SOLPERP: Dec 27 ’21, 16:30

BTCPERP: 28 Dec ’21, 22:30

BTCPERP: 30 Dec ’21, 16:30

BTCPERP: 30 Dec ’21, 18:00

ADAPERP: 30 Dec ’21, 15:30

Overall it was a profitable week and my plan is the same for the week ahead: allow these expansive down moves to retrace and then get on board. Time to keep it simple and hunt for shorts all the way down to the range low.

Never, ever argue with your trading system.

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Trader Alec
THE LIQUIDITY ZONE

Unoriginal but well-read. Editor of The Liquidity Zone.