The Aftermath

The Market Tale (Sep 26, 2019)

“Price action has been quite for a while,” said Bull, “We’re consolidating on top of previous range, which now acts as support.”

Bull analyzes current situation

“$8400 is the psychological level here,” added Bear, “The buyers absorb the supply when the price dips below it.”

“Do you think there’s a large player who’s building his long position at this price?”

“Yeah, seems like it.”

Bear notices that $8400 level is under constant pressure from both sides

“Also, the futures premium is withering away,” said Bull, “XBTZ19 (December 2019) futures contract has been trading $200 higher than XBTUSD before the breakdown. Right now the difference is only $50.”

“The Flippening,” joked Bear.

Bull smiled, but only with his lips. He didn’t take a long position yet — not after the breakdown of multi-month consolidation. There will be a time for longing, but it hasn’t come yet.

“The great thing about flippening is that it works both ways. If you long futures at the right time, you’ll profit twice: both from uptrend in underlying, and from increasing premium.”

“Yes, I’ve noticed that futures always dip below spot when we enter the accumulation range. Do you know why it happens?”

“Whales gobbling up spot. This prevents its price from going lower. At the same time, speculators are still shorting futures with leverage. They become overconfident, and sell at lower-than-spot prices.”

“And then they get punished by uptrend.”

“Ditto.”

Bull & Bear check the difference between XBTU19 (Sep 19 futures) and XBTUSD: even when XBTUSD was in a clear uptrend, XBTU19 still traded at discount (lower than XBTUSD)

“So where are you planning to build a long position?” asked Bear.

“I’d love to start closer to the bottom of current support — around $7400” answered Bull.

Bull & Bear are both looking at daily support

“However, I won’t take any position until I see a clear uptrend.” mentioned Bull.

“Of course,” said Bear.

“And when do you want to close your short position?” asked Bull.

“Never.” answered Bear.

…

“What do you mean?”

“There’s no need to close a profitable position. If I see a clear uptrend, I’ll close it. But I’ll wait until at least one fakeout has been resolved upwards. You know, Bitcoin has a special knack for trapping early longs.”

“Why don’t you want to close at support, somewhere at $7400, just like me?”

“Because supports can be broken.”

“I don’t think it will. But let’s see…”