In a previous article, I discussed Smart Money entities as the driving forces for market price action, the dilemmas they faced in finding the liquidity they need to fill their orders and the ways they got out around this issue. This article will look to break down the bull run that occurred during the latter half of 2021 through the lens of Smart Money strategies.
Let’s dive in!
May 2021 saw a return of Bitcoin’s price back into a consolidation range after previously running up to $65K USD.
With price approaching the lower border of the range, we see two types of retail strategies taking place:
- Long from support
- Or sell-stops to short a break down of the range
These orders represent a pool of sell orders for Smart Money to fill their buys.
Price sweeps the lows allowed Smart Money to fill their buy orders before price reclaims the range low. Now Smart Money needs to identify where they can take profit on their buys. The most obvious zone is just above the previous range high where they can expect to see a large pool of sell orders from:
- Stop-losses from traders looking to short the range
- Buy-stops from traders looking to long a breakout of the range
First area of interest has been hit for Smart Money to scale off some of their position. What we see next is a Higher Low is formed (marked by green curve) and a market structure break of the previous high where Smart Money took profits. These are indicators for a likely bullish continuation. With that in mind, we look to identify the next level of interest where Smart Money might find the necessary liquidity to continue scaling off their position.
We identify the EQ level at approximately $51.3K. This level acted as both support and resistance on several occasions (marked by the yellow circles). Further confluence is provided by the fact that this level lines up with a 62% retracement from the ATH to the original range low.
Like clockwork.
Since we are still trending upwards, it is not unreasonable to now look for the next significant level that Smart Money may look to take profit. Initial observation may draw your attention to the level marked in green that has previously acted as resistance BUT, whilst it may be an appealing position for retail traders to short from, it is not a logical position for breakout traders to be initiating longs from due to the structure highlighted in yellow.
It therefore makes more sense that the target would be the previous ATH.
And that’s all she wrote.
Summary
Once again, this is simply an exercise in looking at the market through the lens of Smart Money to anticipate where they might drive the market. How you find trading opportunities within those movements is a whole other thing – but watch this space.