Below is the full, archived version of Morpheus Crypto Report that was sent to subscribers on March 7, 2022.
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In the February 28 issue of Morpheus Crypto Report, we discussed the bullish reversal patterns that formed in Bitcoin ($BTC), Ethereum ($ETH), and most altcoins on February 24th.
After a few days of tight, sideways consolidation, Bitcoin’s bullish reversal pattern initially did follow through to the upside.
On February 28, $BTC zoomed back above its 10, 20, and 50-day moving averages–all of which had converged as resistance in the 40,000 to 40,500 area.
The initial Bitcoin follow-through rally from on the bullish reversal pattern was impressive, but also short-lived.
In our previous report, we mentioned the February highs as a major resistance level to watch if $BTC reclaimed its moving averages above the 40,500 level.
That’s how it played out, as $BTC stalled and reversed sharply lower after testing major resistance at the 45,000 to 46,000 area (resistance of the February highs).
In anticipation of a $BTC pullback after testing its February highs, we sent alerts to lock in profits on partial share size of several portfolio trades into strength of that rally.
With $BTC giving investors and traders a roller coaster ride last week,, let’s take an updated look at the basic technical picture of the $BTC daily chart:
As labeled above, the current pullback could end up becoming the second higher low on the daily chart since the January low around 33,000–but too early to confirm.
Regardless, Bitcoin does not yet have an accompanying higher high because last week’s rally attempts stalled at resistance of the February highs.
This is why we say $BTC (and most of the crypto market right now) is currently in “no man’s land”–at least for a swing trading timeframe.
In the short-term, it is positive that $BTC managed to hold near the high of its February 24th bullish reversal candle (the prior range of consolidation before the Feb. 28 breakout):
Although we expected a slight pullback after $BTC tested resistance at the 45-46k level, the King of Crypto actually retraced all the way back down to the low of its big green candle from Feb. 28
If $BTC attempts to rally again this week, convergence of the 10, 20, and 50-day moving averages is once again an important short-term resistance area to pay attention to (40k to 40.5k area).
Furthermore, additional overhead supply has been created from the people who bought last week’s breakout above these moving averages and did not sell when it failed to hold up.
As such, the next Bitcoin rally attempt (whenever that may be) will need to overcome more resistance than before, which requires the power of higher volume.
Specifically, $BTC now has a potential double-top formation at the 45-46k range because it was unable to form a higher high to match the Feb.24 higher low.
When Bitcoin first started pulling back from the 45-46k resistance last week, we initially were tracking several altcoins with relative strength for potential buy entry on the pullback.
However, those plays lost their relative strength when $BTC retraced its entire move back down to the prior consolidation.
After scanning hundreds of altcoin charts, we only came across a couple chart patterns that could be considered short-term bullish.
Both $LUNA and $ANC are finally pulling back alongside of $BTC, but both are still in solid uptrends on their daily charts
We have been discussing $ANC extensively in the Swing Trader Room over the past week, as we were patiently waiting for a pullback:
We are not yet making $LUNA or $ANC “official” buy setups on the Watchlist, but are internally monitoring both for potential buy entry (will send alert if we enter).
Our cautious, proactive trade management enabled the Morpheus Crypto portfolio to register another week of gains-–despite high volatility and a failed market rally attempt.
Four of the six portfolio trades we closed this week were winners.
We locked in a gain of +13% by selling HALF of our $BTC position into strength as it neared major resistance of the 45-46k area. We are still holding the remaining position with a tightened stop to reduce risk. The $BTC trade will still be profitable, even f the second half of the position hits the stop.
We also scored an average net gain of +10% on $ATOM by selling half into strength on March 3, and the remainder on the first bounce after $ATOM lost support. We also secured small gains in $AVAX and $HNT.
$SOL and $NEAR both hit their original stops and resulted in losses, although we reduced the $SOL less by selling half of the position near break-even when it bounced on March 5.
Once again, we are back to the point where odds are not highly positive for entering new swing trades right now— either on long or short side of the market.
As the war in Ukraine drags on, ongoing speculation about the ultimate outcome of the crisis may continue to result in choppy, indecisive market conditions from day to day–just as we have seen since the Feb. 24 bullish reversal.
As such, we are now dealing with a news-driven trading environment that can make crypto even more volatile than it normally is.
Nevertheless, it’s crucial to NOT make trading decisions based purely on news events because the market rarely reacts to news in the “logical” way that market participants expect.
For example, when news of the Russian war broke on February 24th, both the crypto and stock markets sold off sharply as a knee-jerk reaction to the news. However, both crypto and stocks swiftly reversed to score large gains that day.
In this case, the negative news did not result in a bearish price reaction for more than a few hours.
Likewise, what is often perceived as “good” news frequently leads to negative price reactions.
This being the case, what’s a trader to do?
Simply never let news events DIRECTLY determine your trading decisions.
Rather, always trade what you see, not what you think!
This simple mantra helps keep you maintain the correct trading mindset every time, without letting your worst enemy–YOURSELF— undermine your efforts.
There are currently no new trade setups on the watchlist, but we will send a trade alert with details if any low-risk trade setups come across our radar.
However, given the current environment, we are content to wait and see from the sidelines, at least until the market shows its hand for the next short-term move.
We know it’s no fun to trade a choppy market, but we’re in this together.
As always, we will continue to provide our no-nonsense objective analysis to help you navigate through the noise.
When the dust eventually settles and conditions improve, we will also be here to provide you with our typical, big swing trading ideas–but when the time is right.
In the meantime, we must take what the market gives us and not force trades just for the action.
Capital preservation mode should be your dominant focus right now.
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