VELVET has once again entered a zone where a short position looks more logical than chasing further gains. After an extended upward move, sellers managed to push the price below the previous candle’s low. At first glance, this looks like a typical pullback signal. But for a short trade, the key isn’t the breakout itself—it’s what happens next.

The key zone is currently around $0.05037. As long as the price remains below the $0.05079 area, the short thesis remains technically sound. $0.05079 is the level beyond which the scenario should be considered invalidated.

There’s an important nuance here. The first take-profit at $0.04974 offers roughly 1.5R. The second, at $0.04932, is around 2.5R. The third, at $0.04869, corresponds to about 4R. So the risk-to-potential-reward ratio looks decent even without counting on a deep crash.

But VELVET isn’t the kind of asset where a break below a single low should be treated as a guaranteed continuation of the move. With relatively low liquidity, the price can take out short sellers’ stops first and only then choose a direction. So the main risk here is a false breakout followed by a quick move back above $0.05079.

That’s exactly why I wouldn’t treat this entry as an unconditional “sell now” signal. A higher-quality setup would be to see sellers truly hold the broken area, with any recovery attempt failing below $0.05079. If the price reclaims this zone, the sellers’ advantage disappears.

It’s also worth watching volume and open interest. If the drop is accompanied by rising volume and a healthy expansion in OI, that gives the downside move additional confirmation. But if the price falls on weak volume and OI doesn’t confirm the move, the chance of a typical stop hunt followed by a move back up becomes much more interesting.

In this situation, I’d use MACD only as an additional filter. It shouldn’t determine the trade on its own. Price structure, the reaction at $0.05079, and volume behavior matter more here.

TRADING PLAN

Short: $0.05037

Stop: $0.05079

Take profit 1: $0.04974 — around 1.5R

Take profit 2: $0.04932 — around 2.5R

Take profit 3: $0.04869 — around 4R

Scenario invalidation: holding above $0.05079.

After the first target is reached, it makes sense to take partial profits and move the stop on the remainder to a safer level. You don’t have to try to capture the entire move with a single order.

The alternative scenario is simple: VELVET moves back above $0.05079, sellers fail to hold the broken area, and the short turns into a trap. In that case, it’s better to accept a small loss than to turn a technical trade into a hope that the price will fall.

MY OPINION

This setup is interesting because it has a clear invalidation point and good potential R/R. But it’s still a short after a move has already happened, not a trade with guaranteed continuation.

For me, there’s one key level here — $0.05079. Below it, sellers retain the advantage. Above it, the short thesis no longer makes sense.

These are exactly the kinds of trades I like most—not because they’re bound to be profitable, but because it’s clear in advance where the market will prove you wrong.

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