Market Minutes: Bitcoin Bounces Off Support
2022.05.17 08:46
Last week, Bitcoin (BTC) reversed higher after coming into major support off its June 2021 low:
BTC Weekly Chart
The Morpheus Crypto portfolio remained 100% cash as the market sold off last week. Then, we bought Maker (MKR) after we noticed funds rotating into the DAI stablecoin due to the UST/LUNA fiasco.
By way of design, money flowing into DAI is automatically bullish for MKR.
After the initial spike in MKR, we waited for a substantial pullback and then entered with an ideal, low-risk entry point. We then scaled out the next day and quickly locked in an average gain of +44% on a ONE-day hold, as Bitcoin started reversing off its low.
The hourly chart of MKR below shows our entry and exit points for this “hit and run” trade:
1-Day Swing Trade In MKR
After closing MKR, we waited for their first pullback after Friday’s rally to patiently and carefully target our next big winner. That’s when we bought Decentraland (MANA) due to its high relative strength and massive volume:
MANA Daily Chart
Despite last Friday’s bullish reversal in BTC, trading was pretty quiet over the weekend. Bitcoin, Ethereum (ETH), and most altcoins edged higher to form two higher highs and higher lows on the 4-hour charts.
However, one key element was missing from the rally–VOLUME!
When prices move higher after a reversal, we always look for the confirmation of higher volume. Rallies on declining volume indicate a temporary lull in selling pressure—rather than new buyers taking control.
In order for the current rally attempt to get some legs, we need to see increasing momentum in the form of higher volume.
Furthermore, remember that BTC and ETH both remain below their 10, 20, and 50-day moving averages. As such, we must view the current relief rally as merely a bounce off the lows—rather than any type of downtrend reversal.
That means you should remain vigilant and take profits quickly, just as we have been doing..
We are not yet seeing many new, low-risk trade setups in the altcoin market, but we continue to scan for the next big winner.
