Outlining the Optimal Bitcoin Price Levels to Initiate Trades

Bitcoin (BTC) Price Highlights

• The Bitcoin price is trading below its 200-week moving average (MA).
• There is resistance at $6,100-$6,800.
• There is support at $3,300-$4,300.

Cryptocurrency trader @CryptoCred posted a Bitcoin chart and stated that he is still not looking to initiate longs. He applied his reasoning in the fact that the price is trading below its 2018 range and he will look to buy strength if the price breaks out above it.

$BTC

Price reached important levels & the rally has been significant.

However, we still made a lower low (weekly) and are below '18 range ($6100, $6700).

When $6k first broke down, the easier longs were back above it.

I think that still applies.

No shame in buying strength. pic.twitter.com/KEgE1Z5IrK

— Cred (@CryptoCred) March 17, 2020

Let’s take a closer look at the BTC price movement in different time-frames and determine which levels offer the best opportunity to initiate longs.

Trading Range

As outlined in the tweet, the previous trading range that offered support throughout the majority of 2018 was found between $6,100-$6,800 (white). Since the price has broken down below it, it is expected to act as resistance in the future. The next area that can act in a similar way is found between $3,300-$4,300 (black). Currently, the price is trading inside a neutral zone between these two areas. Since it has decreased below its 200-week moving average (MA) and is possibly facing resistance from it, the price is expected to move downwards.

Long Setups

The tweet mentions initiating longs if the price reclaims the $6,100-$6,800 support area, in order to buy into strength. However, there is the possibility of attempting to initiate longs near the lower support area in anticipation of an upward move. There are two ways we can do that:

	Entry	Stop/Loss	Target	Risk:Reward
A	$4301	$3999	$6049	1:5.7
B	$3401	$3145	$6049	1:10.3

In the ”A” option, a long would be initiated once the price reaches the resistance line at $4,300, with a stop loss placed below the current wick low. While this option offers a good opportunity for a swing trade with a decent R:R ratio, it runs of the risk of the stop loss being triggered and the price reversing, in case the $4,300 area does not hold. The ”B” option is more conservative, requiring to wait until the price drops to the support line at $3,300, with a stop loss placed below the December 2018 low at $3,145. This offers a much better R:R ratio, but it is not certain that the price will reach it. On the other hand, it is also possible to wait and ‘buy into strength.’ Doing that would require to wait until the price reclaims the $6,800 support level and entering a long once the price retests this level, with a target of the 2019 high at $13,650. To conclude, the BTC price is currently trading between two major resistance/support areas. A movement in either direction would allow for initiating long trades with lucrative R:R ratios.