Family, who understands! Last week, a fan asked me about a cryptocurrency that had been sideways for over 8 months: 'Teacher, is the launch at the weekly level coming?' Before I could respond, the next day it directly broke down from the sideways box, and the fan came crying to complain: 'I sold at the lowest point, does this cryptocurrency still have any chance?'
To be honest, every time I encounter this situation, I want to sigh, 'how long horizontally, how high vertically' – this phrase is no longer a hard rule in the crypto market, especially in the current environment where it has practically become the 'guide to harvesting retail investors.' As someone who has been in this market for 7 years, today I want to share my heartfelt thoughts with you about where the opportunities lie after a sideways breakout and those experiences where we were misled by the 'sideways belief.'
First, let me pour some cold water on everyone: not all consolidations are 'accumulating momentum'; more often, it is 'boiling frogs in warm water'. Like the 8-month consolidation that this fan encountered, have you ever thought about why it consolidated for so long and still ended up dropping? There are two core reasons, and this is the first key point I want to discuss today— the 'capital logic' of consolidation.
Targets that can truly demonstrate 'long consolidation must lead to a rise' will inevitably show signs of sustained capital inflow during the consolidation period. For example, weekly trading volume will not fluctuate wildly but will maintain a gentle increase. Occasional pullbacks will not break the lower edge of the box more than 3 times. However, now many cryptocurrencies that have consolidated for 8 or 10 months are essentially in a 'vacuum period after the main force has sold off'. The main force has long since dumped their chips during the previous small market, leaving retail investors to compete with each other. The longer the consolidation lasts, the more dispersed the chips become. Once there is a bit of negative news, it will lead to a 'long squeeze', and breaking the box is just a matter of time.
I fell into this pit early on; back in 2020, I heavily invested in a cryptocurrency that consolidated for 6 months. At that time, I also believed that 'the longer it consolidates, the higher it will rise.' As a result, after it broke below the box, I foolishly averaged down, eventually losing 30% of my position. Since then, I have summarized a 'three no-touch principle' for judging consolidating targets: First, do not touch those with continuously shrinking trading volume during consolidation; Second, do not touch those that have tested the upper and lower edges of the box more than 5 times; Third, do not touch pure speculative plays with no fundamental support (such as project progress or ecological implementation). Keeping these three principles in mind can help you avoid 80% of consolidation traps.
Returning to the question everyone is most concerned about: where are the opportunities in cryptocurrencies now? Stop focusing on those old targets that have consolidated for more than half a year. My core view is: opportunities lie in 'small consolidations in the new cycle' and 'recoveries after being wrongfully punished'.
First, let's talk about the 'small consolidation in the new cycle'. Here, 'new cycle' does not refer to a major bull market, but rather to localized hot market conditions, such as the recent ecological explosion of a certain public chain. Some quality small targets on it may experience short-term consolidation for 1-2 months; this kind of consolidation is the real accumulation. The key to judging such targets is to 'stay close to the main line'. Where the main line is, there the funds will be, and where the opportunities will be. For example, in 2023's inscription hotspot, those targets that consolidated for 1-2 months early on subsequently performed well; this is the opportunity to seize the main line's small consolidation.
Now let's talk about 'recoveries after being wrongfully punished'. Like this time when fans encountered the 8-month consolidation breaking down, not all targets that broke down are trash. Some targets have good fundamentals but were wrongfully punished due to poor market sentiment. After breaking below the box, such targets often experience a recovery rally. But here, it's important to note that a recovery rally is not a reversal. Don't think you can double your investment just by bottom fishing. My operating logic is 'participate with a small position and take profits when you see gains.' For example, if a target drops 10%-15% after breaking down and shows signs of a stop-loss (like a weekly bullish close or increased trading volume), I would enter with a small position and exit when it rebounds near the lower edge of the box, avoiding greed; that is a stable strategy.
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