The broader markets didn’t move much last week, but that was expected (see last Monday’s letter) after the prior week having a relatively wider range than in past weeks. Historically, a Wide Range Bar (WRB) is followed by narrow range bars or narrow range bodies.
Narrow body bars are ones in where the opening and closing prices are close to each other with tails on either or both ends. We’ll review them.
The market internals sentiment gauge had reached an extreme, which suggested that the market would take a rest, and that is what happened. So as far as the broader markets go, we have more of the same. An uptrend that gets choppy at times, correcting a bit, and then continues to make new all-time highs.
Some money is rotating out of what has been the big winners and into what have been the losers. We are going to be watching the multiple time frame (MTF) alignments of the winning sectors where the money is flowing out of. The higher time frame is still in an uptrend and it’s possible that the lower time frame will set up as a buy and come back into alignment higher. I will review that in our video.
Bitcoin Mania 
Lately, we cannot go to many websites or turn on the TV and not hear about Bitcoin. So I may as well chime in too. Opinions about Bitcoin go from it’s a scam and everyone will lose all their money, to it’s on its way to $1 million — buy any dip. Like most things, the truth is probably somewhere in the middle.
As technical traders and investors, the truth is always on the chart that does not lie. There are no fundamental measurements or values for Bitcoin, so its movement is all about perceptions or a belief about the future. Beliefs are called that because they are not facts. In other words, you believe it is, but cannot prove it — no one really knows. Is the market going higher? I believe it is, but let’s see.
The question that everyone is asking, is Bitcoin now a mania and a bubble that is going to crash? No one knows that either, but of course there are opinions.
If you bought bitcoin a year or two ago odds are that your opinion is that it’s going to go higher. If you bought it two days ago, you are already down several thousand dollars as of this writing — and you’re really hoping and may be praying that it’s going to go higher.
What do I believe? 
My “belief” is that there are opportunities in Bitcoin and other crypto-currencies. While these crypto-currencies are something that is relatively new, they are no different than any other tradable instrument that can be charted.
Like many of you that are active day traders, there have been many times when I do not know the name of a company or what they do but I will trade it based on the chart.
The key to successfully investing or trading based on technical analysis is using foundational concepts. The most foundational one being the multiple time frame alignment of the trends. The trends used have to be based on the time frame that you want to operate in — and a higher one — to provide a bullish or bearish bias.
So short-term trader can be bullish on their time frames while long-term traders are bearish on theirs, and vice versa. As far as Bitcoin, let’s review the intermediate to long-term view based on the charts.
The monthly chart has moved up vertically (no pullback) this year so it is extended with a void below — but the trend is still up.
The weekly chart started moving up vertically in the second week of November and is extended from any recent support — but the trend is up.
The daily chart started to move up vertically in November and last week the range expanded tremendously, which set a short-term high — but the trend is up.
The simple and logical conclusion (my belief) is to not be a buyer at this time based on the analysis in these time frames. However, assuming an orderly retracement (this can happen in different ways) based on Master Trader Technical Strategies (MTS), that retracement will be buyable.
As with any type of entry point, it must have a confirming price pattern in alignment with our bias.
As a Master Trader subscriber, MTS can be taken with a $1,000 discount at this time with coupon code
MTST32018 for $995. That discount will be gone at year-end.
This is the best investing and trading course available anywhere, bar none. The strategies apply to any tradeable instrument.
As you may know, Bitcoin futures will start trading tonight (12/10). Some believe that this is a sign of a top and it may be. The charts already suggest a pullback or what could be a sideways correction.
If you are thinking, didn’t the chart suggest that prices were climactic at 5000 or 7000? The answer is that no, it didn’t, but does now.
As with any tradable instrument that has mass attention and liquidity, there is an opportunity for educated investors and traders with a plan.
We are interested and excited about the opportunities that the Bitcoin futures will provide. Are you?
DOW JONES INDUSTRIAL AVG.
Above is the chart of the Dow Jones Industrial Average that we review each week. There isn’t much more to add that I didn’t say above about the broader markets. Volatility contracted last week as expected. If last week’s retracement is the extent of the pullback from the recent high, and prices go to new all-time highs significantly, I would expect more of a correction afterward.
This type of a shallow pullback sometimes results in what’s called an M-Top. If prices stall in the area of last week’s high and then reverse lower, that would be the M-Top pattern. Realize that the word top in that context does not suggest “the top.” If I ever mean “the top,” I will say that and explain why.
My ideal scenario for a buyable entry point would be a continued pullback this week down below or in the area of 24,000. One of my favorite setups is a lower high and a lower low closer to the 20-MA and Minor Support (mS). Since we are talking about the daily time frame here, that set up would be in alignment with the uptrend in the weekly time frame. That scenario has a very high probability of moving higher.
We will see how the week unfolds and report accordingly.
BROADER MARKETS
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TREND MATRIX AND INTERNALS
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SWING TRADES
Below is a weekly chart of ProShares UltraShort 20+ Year Treasury (TBT).
Trade: Consider shorting Jan (1/19) $33/30 Bull Put Credit Spread (39 DTE) for around current midpoint of $.39/share.
Technical Setup: Pull back to Major Support and Bottoming Tail weekly.
Option Strategy: Bull Put Credit Spread (BPS).
Stop Loss: None, we will either roll or take assignment of stock if assigned.
Below is a daily chart of Rite Aid Corporation (RAD).
Trade: Over $1.90, consider buying stock. Note: Only swing trade and will close before earnings 12/21.
Technical Setup: Pull back to converging 20/50-MA after +WRB Breakout on +Vol. daily.
Stop $1.74.
Below is a weekly chart of NRG Energy, Inc. (NRG).
We will be watching on a daily pullback retest.
CORE/POSITION TRADES
Below is a daily and monthly chart of Riot Blockchain, Inc. (RIOT).
Trade: Over $16.23, consider buying stock.
Technical Setup: See above chart.
Stop $11.98.
Miscellaneous Member Documents and Reminders:
Adjustments and Comments on Open and Closed trades in Master Trader’s Market Edge Advisory Letter. Note: Our Trade Updates are timely posted in a separate Report in the Member’s Area. Please CLICK HERE to see that document for a current reflection on all Open and Closed Trades since the spreadsheet updates immediately and will always be more current than this e-mail update.
Please see Master Trader Guidelines for Trading the Open and Gaps in Member’s Area for rules on trade entry, gaps, etc.
Below is a link to individual videos explaining in greater detail the definitions of the main option trading strategies used in the Master Trader Option Strategies Series for Investors and Active Traders to generate wealth and income.
Description of Master Trader Directional and Income Option Trades can be seen HERE
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Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com
All the best,
Greg Capra
Managing Director of Master Trader
Pristine’s Founder and Creator of the Pristine Method
Dan Gibby
Chief Options Strategist
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NOTE: Master Trader will show opening and closing prices of all stock and option trades. We do not recommend proper share size for your particular trading style, risk tolerance, or account balance. We urge you to calculate your own share size based on your individualized risk parameters, Trading Plan, and familiarity with the proposed trade strategy and risk.
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