Every setup is four pieces in order: absorption, exhaustion, climax, initiation.

0. Location, location, location

Before any of the flow stuff, wait for the location.

If you're hunting a long and you're in the middle of the range, the mean, things aren't going to go well. Taking the exact same setup 1,000 points higher/lower is the difference between winning and losing.

1. Absorption — the easiest thing to screw up

This is the one you'll see everywhere, every day.

Lots of selling, then not a whole lot of downside. Liquidity slowly soaks the takers and they give up. That's the momentum loss pattern I've taught for years.

But absorption alone is never a trade. Please get that through your head. It's an "okay, maybe it's time to start looking for the long," not "I'm seeing absorption, I'll build the long." Long into absorption and you go underwater a lot of the time, because it's very early in the setup.

2. Exhaustion — the takers giving up

Plays out alongside or just after absorption.

Simple idea: declining taker volume. As the momentum loss falls off and the takers give up, that's when structure starts to turn.

3. Climax — your trigger

You won't get this on every setup, but when you do, they're S-tier trades.

It's a big uptick in volume in the direction of the original takers. Looking for a long, you want a sell climax: noticeably larger sell volume than you've seen recently, ideally a lower low that forms in a wick and immediately reverses.

That wick stops people out, so entering when others get stopped means your odds of getting stopped are far lower than five minutes earlier, when you'd be getting flushed with everyone else.

Entering and exiting on climaxes is high expected value.

4. Initiation — the changing of the guard

This one's management, not an entry trigger (it’s usually too late).

After absorption and exhaustion, you want the team you're betting on to actually take over and lift price.

Your first local higher high after a run of lower highs and lower lows. Sometimes it's a big buy wave, sometimes small, it's more about how price moves.

Bears ran the whole move down, the initiative comes from the bulls, and that's your sign the trade's going to play out.

A couple of things that matter

Confluence helps.

A sell climax led by perps rather than spot is fantastic news, that's the side you're betting against giving up.

A small open interest wipe still counts when location and the rest of the flow line up.

This takes a lot of screen time to internalize.

Good luck.

Full schematic: absorption, exhaustion, climax, initiation

The framework hasn't changed.

I’m using the 3-week composite plus previous week's VWAP and values to guide me:

For this multi-week rotational environment to continue, we have to hold above previous week's value area low around 59.3k.

The 4-hour trend has been the most dominant over these past 3 weeks, carrying us from the composite high down to the composite low. Break it and I think we squeeze up.

This morning we got a news-driven pre-market pump on the back of Saylor. You can see it in the flows, spot burst buying with about 1k+ perp long contracts opening into it.

What I want now is for some of that pump to actually hold, because that's what gives us upside continuation into the New York session.

If we just give the whole thing back, that's rotational locally at best, new lows at worst.

And if we lose previous week's lows on top of it, the path of least resistance is a continued walk down toward the 2024 yearly value area low.

TLDR

Break H4 trend = squeeze up a bit

Lose prev week VAL = down toward 2024 yearly VAL around 50k

For once Bitcoin looks like we might get a bit of relief.

The downtrend's slowing in momentum, RSI's giving you divergence across these lows, and all these wicks are getting absorbed.

Doesn't guarantee we won't break down, but there's genuine buying power under here. So we might get a decent rotation up to like 64k, maybe as high as 66.

I'm not just firing off into here, though.

I want to see us break out one of these meme trend lines and preferably reclaim that 60.8 so there's an actual change of structure. 64k is the level we have to break for me to get properly bullish, it's been resistance, resistance, resistance, and when we break it we tend to run for a while.

The real strength is in alts

There's already a migration over to Solana alts like FARTCOIN, PUMPFUN and WIF.

That's largely Ansem pushing the whole pumpfun meta, so the trenches are reborn for a while, then we slowly bleed out. In the meantime it presents me with an opportunity.

FARTCOIN had a lovely consolidation and breakout, but it's capped by previous highs so that rotation's done for now.

I'm looking at anything in the upper quadrant of spaghetti in these new SOL memes.

If it gives me a consolidation and a range up there, I’ve got the next breakout play.

HYPE I'm short from around 72

But I'll close that and flip long if we break 64, which has been a clear level.

I think it comes back on its own anyway, strong coin, doesn't need the meta. We've banged on about it for months, caught one good move from like 42 to 69, then struggled to do it again.

USELESS has had a bit of relative strength

But from a SOL-meme perspective it's actually done badly, so maybe it's lagging.

I might preempt a little, but the clean entry is higher up, where invalidation is just losing that 0.0739ish support. And it's always ish, never to the penny. Illiquid coins like this just wick all over.

PUMP looks like rubbish

But we have a high timeframe deviation, and they still make half a million dollars a day, so I'm not convinced it just dies.

I'm going to buy some and run it purely as a 4-hour trend following trade. Lose the 4H trend and I'm out.

Everyone thinks a PUMP airdrop would be bullish. I think it's the opposite, everyone just sells. But it's unobjectively one of the stronger coins out there, so I’m going for it.

Don't turn up early to the wrong party

I'm not bothering with SOL itself yet. Same rationale as Pump, I want the retest and reclaim around 79, back into the former range. I'm happy to miss it. I don't want to turn up early to the wrong party.

So the plan…

A couple of memes, HYPE, PUMP, and watch SOL.

On Bitcoin, the long I’d look for is the break of the downtrend and the reclaim of 60.8. I'm not actively shorting this region, but if we retest and break down, you can play an aggressive short.

We've had a lot of pain, we're showing some signs of strength, and there's an emerging narrative.

I'd rather be wrong chancing it than miss what's probably the only good alt window we get for the foreseeable few months.

Au revoir.

BTC is trading into the low side of the 2024 ~8-month consolidation value with a slowdown in activity and lows getting absorbed on LTF.

Leaning towards some mean reversion back up, but each attempt keeps getting sold into by spot, which suggests there's potentially another breakdown on the horizon.

Two scenarios I'm watching

One, a break above ~60.5k with spot/perp divergence. This morning Coinbase spot started dumping into a sweep of the highs, so the long was invalidated. I need to see spot buying going along with price.

Two, a break below, poor lows cleaned up, then spot absorption and aggressive spot buying to revert higher. Perps getting long while spot fades is your sign the move is fairly weak.

In terms of value, 63-64k is where a few things align. Past that, the high 60s to 70k is on the table, but plenty of work required.

Last two trades were both shorts and fairly selective, from 81k and from 66k, both fully covered.

Sitting on my hands now, waiting for a decisive break out of the 4-day session bracket.

People are getting bearish down here, but price doesn't move in a straight line, even in a bear market.

In previous newsletters we've been bidding the outperformers and expecting them to keep outperforming.

This gave us the best opportunity to succeed and let the market do most of the heavy lifting.

HYPE

The 6H 200 MA trend on HYPE has reflected this mindset beautifully.

So far so good.

The HTF trend is holding, and a potential higher low on the daily is getting locked in, so I have no reason to doubt continuation toward $75 and beyond.

This is largely the same concept we've been playing on repeat since January, and there's no reason for me to abandon it while it keeps working.

I've performed best when I don't bite the hand that feeds me. I simply respect the trend until it breaks.

SOL

We've spent so much time on the outperformers that we've generated profit to use for rotations moving forward, so I've allowed myself the luxury of looking at the laggards.

If SOL were to reclaim this HTF trend, we'd be shifting market structure favorably (higher highs and higher lows on the Daily) and deviating back inside the previous 4-month range.

All of it together would be a sign of greater strength entering the market.

That's something we've seen infrequently over the last 9 months, and always fragmented.

We haven’t seen all three of these true at once: key resistance reclaim, bullish Daily structure, and a key trend reclaim.