“Buy the rumor, sell the news” was a term used among traders in the last century. Back then, it was profitable if applied to purchasing stock three weeks before earnings release news. A much more powerful principle is a valuable edge derived from this saying. Professionals know that news releases can turn the direction of a market. Consequently, these can be entry or exit points. While amateurs wait for a news release and are victims of their debating process of interpreting the news data, professionals only use the news release as a timing tool for their preplanned trade execution.
With news, volatility is typically increasing, and a larger volume of transactions is at play. For amateurs, data evaluation in a turmoiled market environment generally results in procrastination of execution, meaning no trading or chasing trades. Professionals find necessary liquidity to exit a trade or use volatility to fade moves on less risk for entries.
Last week’s invasion of Ukraine was no different. Only those prepared with a plan were able to position themselves in Bitcoin (BTC-USD).
Bitcoin, daily chart, the giveaway:
A giveaway was a widespread larger supply zone throughout the crypto sector (green horizontal lines on the daily charts above), and preset buy entries in the crypto space were getting triggered. Inter-market relationships stack the odds of placing a successful trade.
Bitcoin, weekly chart, entry target zone within reach:
With our entry target range nearly reached (see our previous chartbook release), we were ready to act, knowing a possible larger time frame tuning point was a possibility.
You might argue that the price has not penetrated the entry zone. Still, at a closer look, you will identify that due to exuberant volume on the surprise news day, the supply zone values had changed to provide significant support right at the rim of our initially planned zone. Charts need to be consistently updated to stay accurate!
Bitcoin/Gold-Ratio, weekly chart, another edge stacked:
Precisely on the day in question, we also got a hedge rotational “buy signal” for bitcoin versus gold (XAUUSD:CUR) and the SPDR Gold Trust ETF (GLD) on the weekly chart. Consequently, this signal provided another inter-market relationship edge that supported our decision-making for aggressive entry. What we can see on the chart above that compares bitcoin with gold is that since institutional money has become a massive part of bitcoin holdings, these more significant funds rotate their money in and out between gold and Bitcoin as well as the Grayscale Bitcoin Trust (OTC:GBTC).
Following the yellow line, one can see prices being high to buy bitcoin with gold at double top, and acquiring bitcoin at a double bottom is a way to take advantage of cheaper bitcoin prices in relationship to gold. For us, a good reason to assume that gold holders might switch to bitcoin for the next foreseeable timeframe, to hedge their wealth preservation portfolios.
Bitcoin, daily chart, profits booked and room to go:
The weekly chart above shows four more reloads within the last five days. All trades have been risking mitigated with our quad exit strategy. Consequently, the remaining position was market money at no risk to us. We posted daily calls to prepare interested parties for possible re-entries. Prices have already advanced by nearly 30% from the lows.
This preparedness and merely following rules allow ending up being positioned and not dependent on whether a turning point matures. Even in a negative outcome, profits have been made. With a bit of luck, these remainder positions can go a long way and provide substantial additional profits. In addition, one is positioned early before a trend is even established.
Bitcoin, buy the news:
We must confront opinion-forming debates led by ego (the need to be right). We use reconditioning behavior to achieve the best results. The goal in mind is to “erase” intuitive responses and an execution time delay leading to sub-par entry timing. Consequently, consistent extracting of profits from the market is possible.
This article was written by
Florian Grummes is an independent financial analyst, advisor, consultant, trader & investor as well as an international speaker with more than 25 years of experience in financial markets. Via Midas Touch Consulting he is publishing weekly gold, silver, bitcoin & cryptocurrency analysis for his numerous international readers. Florian is well known for combining technical, fundamental and sentiment analysis into one often accurate conclusion about the markets. www.midastouch-consulting.com
Disclosure: I/we have a beneficial long position in the shares of BTC-USD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.