A Technical Analysis Trading Strategy for Cryptocurrencies

In this video, learn a simple and effective technical analysis trading strategy for cryptocurrencies. Gain a front row seat to watch a consistently profitable firm prop trader, moderated by another firm prop trader, review a technical analysis trade in cryptocurrencies that you can use to help grow your trading account.

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in this video learn a simple and
effective technical analysis trading
strategy
for cryptocurrencies hi i’m mike bellafiore
co-founder of smb capital
and we’re a proprietary trading firm
located in midtown manhattan
and i’m also the author of the trading
classic one good trade and the playbook
in this video gain a front row seat to
watch a consistently
profitable firm prop trader moderated by
another firm prop trader
review a technical analysis trade in
crypto currencies that you
can use to help grow your trading
[Music]
account
today i’m going to be going over a
bitcoin sympathy trade i took it’s a
daily breakout trade i used uh via
equities to take advantage of the
movement in bitcoin
so as for the overall trade strategy
it’s going to work best at a time when
bitcoin is breaking through important
support or resistance on meaningful
volume
um and that’s the case with like all
these bitcoin
sympathy trades i’m taking uh bitcoins
just chopping around these names aren’t
going to trade as cleanly but the
correlative properties
really tend to come around when bitcoin
is moving directionally and that’s
happening
often and usually when we’re breaking
through key inflection levels
and so in essence this is a sector
vehicle trade
so i’m just viewing bitcoin price action
as the
leading indicator for overall sector
strength and then
once i see that i’m flipping through a
variety of bitcoin names that i have
it’s just a basket
so in that basket i have btbt mogo
can nxt d ebon
and a few other ones but those are the
main ones i’m looking at and then i’m
checking which of those
is set up the best on the hourly or
daily for a technical breakout
as far as the entries it’s just a pretty
standard approach for high time frame
technical breakouts so
going and building it with the mentality
that i’m going to need to give it a
little bit of space and i’m intending to
hold this for a couple hours to
potentially even a few days and then
once i’m in the position just monitoring
price action
and volume uh along with what bitcoin’s
doing
in order to spot potential areas of
exhaustion and engaging where i should
be looking to take some profits on my
position
for uh people who may not be too
educated on bitcoin and
and those stocks could you maybe go over
just like how you
determined this basket and what kind of
really makes them correlated to
bitcoin in a way i know there’s like a
lot of logistics but maybe just an
overview
um yeah so some of it is self-fulfilling
where
people have just settled on these names
as bitcoin names and when bitcoin moves
people hit into these names
uh trying to take advantage of the
movement in bitcoin um
so once they become kind of established
in the basket they stick there and when
bitcoin moves
these things follow but the real thing
is these are
majority of these are bitcoin mining
companies so they mine for bitcoin
so when bitcoins doing well the value of
the assets they’re
picking up are increasing and vice versa
when things are going down
as well as uh many of these companies
hold bitcoin on their balance sheets
so like inherently if the price of
bitcoin goes up the value of their
balance sheet goes up in
which would imply that the value of the
company is going up and again if bitcoin
goes down
they have less money on their balance
sheets so that that is the general
reason
okay great that makes a lot of sense and
then so for a catalyst
one catalyst was intb uh signed a
three-year colocation agreement with
compute north to secure
power capacity and reduce operational
costs and the reason this is important
is intd
recently purchased a bunch of bitcoin
miners from can
and can begin catching a bid on this day
in sympathy with int
so when i see this i’m essentially just
recognizing that market
participants are viewing what’s good for
intp
is good for a can but more importantly
than that for sure is what i’ve been
talking about
with breaking through uh important
or resistance levels and so for the
first time in several weeks bitcoin was
breaking through
this resistance at 52 500. it’s a level
that i’ve been watching really closely
and been talking about in my reviews
nearly every day
as an opportunity i was looking for and
so
when i saw that breakthrough of that
level i had a suspicion that bitcoin
would probably be
continuing to push and put in new
all-time highs relatively soon
afterwards
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intraday fundamentals
nothing too crazy i’m just looking at
atr as a metric for
how far i think this thing can go and
then float 109 million so certainly not
a low float
but the magnitude of the moves it makes
especially with
comparison to the moves that bitcoin
makes it it
makes wolf like moves so
i think they can capture multiple atr’s
of upside as well as to the downside
so i’m just trying to keep that in mind
and then for
bitcoin you can see obviously been
incredibly strong
previous uh like 2017 all-time highs
were here around 20 000
and then we’ve just been kind of
straight up since then and then
at the time of this trade we were coming
off of this big wash from 58 000
so we made new all-time highs washed out
and had just a nearly month-long
consolidation zone
uh below between like 44 and 52 000
where 52 000 was the resistance level
for this overall consolidation zone
and this is generally what we see with
bitcoin you can see the same thing
happened here
made a big run up and then a steep
correction about 30 percent
and then about a month of consolidation
a break higher
and then repeat the process so i’m kind
of viewing
this as an analogous move to this move
right here
while using bitcoin as your main focus
is it really the technicals that’s your
main catalyst versus
like actual news and things going on
with bitcoin and then
maybe how much does arvol impact that is
that are you choosing the
basket names that have a lot more arvol
or is it also more technical based on
those
in tandem with bitcoin it’s largely
technically based
so like i said the there was the intp
news with can
but i really don’t see that nearly as
important as i see the
the move that bitcoin is making here and
in general i’m really only taking trades
in bitcoin names when
bitcoin itself is doing a lot of volume
and again that happens when we’re
breaking through important
inflection levels obviously um so
when i see this kind of move happening i
have in my mind okay this is the kind of
day where i want to be taking
a bitcoin correlation trade and i want
to be figuring out what my vehicle is
and then that’s when i flip to the
basket of stocks that i look at and see
which one of these is best set up to
take advantage of
uh the move that bitcoin is making which
one of these uh wolf float or
bitcoin related names is the most
clearly set up for a technical breakout
and let’s use that as my vehicle
throughout the day
um and then long-term technical is just
the daily here on cam
you can kind of see what i’m talking
about bitcoin made new all-time highs
uh right around here i believe um
and since then cam has gone from like
four bucks all the way up to
30 at the time of this trade um so it
can make some really large moves and
what i’m looking at with this chart that
was so attractive to me is this 25 level
where we spent a long time consolidating
the this has really been the length of
the consolidation that we saw in bitcoin
when bitcoin was bouncing between 44 and
52k
uh can was also consolidating granted so
it’s a large consolidation zone but it’s
undeniable this 25 level is important
we’ve gotten up above it twice three
times but have never actually been able
to close above there or do significant
volume above there
and so once i saw a can holding above 25
that’s like a big green light for me to
start looking to build out of position
it’s also nice that that range had
continuously high volume all throughout
there like the technicals aren’t great
up in there
but there were clearly people holding it
up even if the levels weren’t too clear
that’s definitely yeah really nice when
you get that final breakout confirmation
you know there’s a lot of people
involved now yeah for sure and
just in general this this daily setup is
something i look for a lot in like low
float names
just when we get this hold above the key
level that keeps getting wicked out of
generally you can see some real legs to
it
and then you can just see it a little
bit more clearly on the hourly again
like this 25 to 26 ish region we’ve done
some volume but have certainly never
sustained and almost all the volume was
done during after hours or pre-market
so now that we’re actually pushing above
here this is definitely significant
as well as this 2250 level where you
could consider taking uh
initial trade working for this breakup
but personally that’s not how i like to
trade so i didn’t get any entries there
and then pre-market again for the same
reason as with the 2250
uh that i was explaining this isn’t
going to matter too much to me i’m not
really interested in trading can until i
see it
up towards 24 or 25. 25 so
good to see when we get a range break
above free market highs but that’s about
all i’m going to use it for and i’m not
going to use these
technical levels for entries yet and
then just a concept i wanted to go over
quickly is
what bitcoin was doing intraday so on
the higher time frames bitcoin is
breaking
uh an important level and i expect it to
push quite a bit higher
but intraday uh because it’s a bitcoin
sympathy name you have to be watching
bitcoin on lower time frames so i always
have like a five minute chart up when
i’m trading these bitcoin sympathy names
and so what we saw is uh on
the day prior we had the breakthrough 52
000
um and this is during the overnight
session when none of the equities are
actually moving
we we broke through the level and then
on the day of this trade we were
essentially just moving sideways
um and that’s good enough for me all i
want to make sure is that bitcoin’s not
uh bitcoin’s not getting in the way of
can breaking out so
it would be nicer if bitcoin were going
higher uh but the fact that bitcoin
isn’t breaking back down is good enough
for me to be looking for the breakout
yeah and then the one minute technical
so just a really clean
uh a really clear move of strength on
the open the first 30 minutes we push
through 25 pretty cleanly i’m right here
again this is the level i’m really
eyeballing as as they
as the clear the line in the sand we get
a bit of a pullback but hold above view
out very nicely
and then really get uh several hours of
consolidation before
pushing higher into the close so trade
management
um could be convinced that there’s ways
for me to get into bigger size here but
the way i was doing it
i wasn’t involved for any of this
morning move it’s just not part of the
way i build out these positions
um it’s it’s more difficult to manage
risk intelligently in my opinion
um but we got this push and certainly
when i see it push all the way up to 26
i’m thinking okay this is definitely the
vehicle i want to use
and then we get this pullback to 24
which i don’t bid into
although there’s definitely an argument
to be made instead i wait for this
consolidation zone back above 25.
again this is the level from the daily
that i think is really the
key level build into my first shares
there
and then we start just drifting higher
and it becomes clear to me that we’re
probably not going to see much lower on
this name
so i built into another lot here again
these are just
starter lots though and i have bids
placed down from 25 to 24
with pretty pretty substantial size
because i think the technical setup is
pretty a plus
so though i did get these starter watts
i’d be comfortable getting this position
like five times larger than i
actually ended up getting and then just
putting all the risk against a hold
below view op and 24
is a very reasonable way to do it that i
think would work quite well
um and then due to the fact that i just
didn’t have a whole lot of risk on the
table
i think that this multi-hour
consolidation zone is an area you could
make an argument for
putting on more size and building up the
position um it’s just an extra point
of risk that i have to be willing to
give it which is a bit concerning
for me so i didn’t actually end up
putting any on but into the close we end
up seeing
uh volume come in and push to the upside
as we break to
new all-time highs here and this is just
something i like to do with my trading
is if i know that i’m trying to get out
of a position not
trying to get my way out of it using
tape
i think past the first 30 to 60 minutes
of the open
relying on tape too much for the exits
can give you a lot of
false signals for getting in and out of
positions so instead i just like to be
systematic and
i call this scaling out linearly i scale
it linearly from 27 to 29
and even lots every maybe 25 cents on
the way up
uh 29 being a fairly substantial move
about an atr from the lows of
this area right here is that how you
were kind of determining your
like mental price target was kind of a
atr move with volume off that
consolidation you initially saw yeah and
i’ll talk about it later i think that
there’s a lot of merit for me holding on
to
at least a portion of the position i
think that’s like the biggest mistake of
the trade
um but yeah if i can capture like an atr
move into the close
then i think that’s very worth locking
in a decent bit of risk especially as
we’re coming into the clothes and i
haven’t taken any sales yet
i do think lightning up the position
substantially into this kind of price
action is just
kind of mandatory yeah so here at the
executions it’s nothing too crazy
uh again get this hold about 25 and i’m
bidding into it
um to reiterate what byron was asking
this 20
this v wap level aligning with this 24
which is the one of the pullback is
pretty convenient and i think that if
this is really going to be the breakout
that i’m looking for
we shouldn’t really see backboard with
these prices so i think it’s very
gives me a very clear way to position
myself and size myself correctly because
i know exactly where my risk is
yeah and then scaling out on the way up
into the close
so as for what to improve i think
there’s two uh primary issues
for starters i think my starter watts
should have been a decent bit larger
like 50 to 70 or 75 to 100 larger
just given what my current stop is um
and given the clarity of the risk i
think that
i just need to be getting into bigger
size when the when the context is so
well set up for me
and granted due to the fact that we
didn’t really get much of a pullback
i never would have been able to get into
max size on this position
but the higher time frame context makes
it such that like each of my individual
tiers
even if i don’t get filled on all those
tiers those tiers should be larger
than when i was what i was actually
risking and then the bigger issue which
i was talking about i think i need to be
giving a portion of this
uh and setting it aside as an overnight
position i think about 20
is reasonable as like a potential swing
idea because
we’re it’s such a clean daily breakout
and the strength of
the bitcoin move you know it’s
reasonable to expect that we can see
can move quite a bit higher and that’s
what we ended up seeing by the next
morning in pre-market canada reached
33.50
my last sales on this trade we’re at 29
and then later that we can’t hit 39. so
those are the kinds of moves you can
expect to see with these
with these kinds of breakout trades and
when they set up how they did
in this trade it’s not you shouldn’t
really
expect to see just one day of breakout
i think it’s very reasonable and
practical to be looking for two or three
days of upside even if you don’t take
the whole position or even half of the
position at least taking a portion for
like a higher time frame bigger picture
idea
i think is i think it’s just the next
and one of those next progression steps
i need to make in order to become a
bigger trader
is to try and capture these larger time
frame moves
um and like i said the the swing idea
that size is going to be relatively
small
and part of that is because swinging
these breakout trades on bitcoin names
can be difficult like if this were a
independent name not tied to any sector
i think that i like surely would have
taken some of this overnight
but the issue is when bitcoin is playing
a role in the movement of the stock
like even though the setup on can is
perfect or it’s very solid at least
um it could still be the case that
bitcoin just sells off and then just
completely ruins the technical setup for
the breakout
so that was my big concern but it’s
still worth having some risk on the
table
yeah i think that’s a really important
thing to note that
you’ve you have your risk not only in
can but also
you’re thinking of your risk and
correlation of bitcoin and what that
could be doing
overnight and how much more volatile
that could be so
i definitely think that’s just a good
point to show everyone like how
important bitcoin really is and the
execution of
your trades and these basket stocks yeah
it’s massive um and also because of that
variable
it makes it a lot harder at least from
my experience to make systematic rules
for everything you’re doing because that
additional that additional variable of
what bitcoin is doing
just really complicates things so you do
have to make a little bit more
judgment calls in my opinion but this is
one that i probably
was too conservative on hey go ahead and
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