Crypto: What Will It Be?

Louis Sykes
February 11, 2022

As technicians, our job is to respond and react to the evidence in front of us.

The market has a funny way of punishing those who let their ego and opinions drive their decision-making instead of objectively following money flow.

We say it over and over again: As a trader, your only job is to follow money flow. Everything else is noise.

This morning, we can't help but think about the resolution from this rally seen in a handful of crypto stocks. I think Microstrategy $MSTR and Coinbase $COIN show it better than any other.

What will it be?

Will MSTR and COIN find resistance at former support?

Or will these two names put in failed breakdowns and squeeze higher?

For us it's simple.

If we're above those May lows, that's likely taking place within the context of Bitcoin continuing the momentum it's enjoyed over the last week.

Don't underestimate these setups.

We're of the view that if Bitcoin is above the macro support of 41,000, the bias is to the upside looking structurally.

But tactically, we're anticipating some consolidation and contraction in the short term before price makes another leg higher.

We've even taken tactical shorts in coins bouncing back into supply to take advantage of this, which have been working following the CPI print.

Now if this does NOT happen and price continues melting higher, we could see a real squeeze take place in MSTR and COIN -- not to mention the other crypto-related stocks.

Just think about how powerful this setup would be. Everyone's looking to add at lower prices given the run-up experienced over the last week.

If price just continues grinding higher, all those limit orders will never get filled and traders will be forced to buy at higher prices to avoid the fear of missing out on the next run higher.

This is why we love these "failed breakdown" setups.

It certainly wouldn't be anything out of the ordinary. Bitcoin has a tendency to fake out at major turning points.

Is this just another one of those?

So, what does that mean for MSTR and COIN?

What's the trade?

Let's be clear; like many cryptocurrencies, both these names have broken down from textbook distribution patterns and are now bouncing back into supply.

We have nothing wrong with taking a swing at shorting this bounce -- the risk versus reward is very much in your favor with a clear invalidation right above current prices.

It's a good trade.

At the same time, know what you're getting yourself into.

If we see further strength from MSTR and COIN in the coming sessions and they start showing their heads above those May lows, be prepared to flip the book aggressively long, because the squeeze will be on.

That's how we're approaching these two stocks and most coins from a tactical perspective right now.

What do you reckon?

Be sure to send us your thoughts; we'd love to hear 'em.

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Allstarcharts Team.

 

 

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