Bitcoin : the recurring Cup & Handle scenario + OBV trends
Updated
Hello everyone. I'm back at the writing table, looking at things from a distance as I like to do.
The main chart does not look like what I wanted. To make it look as I had planned, please minimize the indicator (pull the middle line towards the bottom)
Today we'll be looking at how price has reacted to previous ATH Monthly candle closes.
Before that, one word about what a Cup & Handle is : It is a pattern sharing similarities with an ascending triangle. It shows where an extremely strong resistance is located, how price is being rejected a first time, then consolidates below it, and eventually, if the resistance breaks, it is a very good buy signal with a safe Stop-loss. On large timeframes, consolidation patterns like this one, are extremely reliable and do not necessarily need many more indicators.
Chart 1 & 2 (Main chart and chart above) : Cup & Handles from previous cycles & MA50.
Notice how the previous ATH monthly candle closes became strong resistances on the following market cycles ? After hitting the resistance, price pulls back, consolidates, and then breaks out a few months later. This has happened twice before, and there are signs that this could be happening once more. Right now :)
MA50 is the yellow line. It's been a useful support before so I left it here.
Cup & Handle 2011-2013 : Perfect C&H. The right border of the cup is at the same level as the left border, and the handle has a perfect size and shape. Breakout was done on the handle on that level too (previous ATH monthly close)
Cup & Handle 2014-2017 : not nearly as perfect : the right border of the cup did not reach the resistance and pulled back earlier. The pattern is still valid in my opinion : the breakout happened on the resistance, and price accelerated a lot after that level.
Chart 3 : Cup & Handle 2019 ?
Looking at the present. Price was rejected end June on the previous ATH monthly candle close, just like in previous cycles. With the A Version of the handle : the bottom is in (or not much room to go lower). That's the standard shape for a Cup & Handle : handle is much smaller than the cup.
B Version is an hypothesis using the MA50 as support. I'm considering it but the handle is not what you'd normally be expecting for a handle.
Chart 4 : OBV Analysis (lower part of the chart)
I've been looking at indicators to help me decide if Handle A is more likely than B. I'm still not sure, but here's food for thought using OBV.
I've found a few levels to look for on other indicators (tops & bottoms mostly), but they're not helping here. On OBV though, there are some very interesting confluence levels. I named them Support 1 & Support 2 on the chart. Price has reacted to these lines in the past. Also showing 2 downtrend lines (white) and one uptrend line (green). Unfortunately, the uptrend line has been broken recently. This is worrying, but there are not a lot of contact points on that line so maybe it's not doom time yet.
Previous OBV downtrend breakout (october/november 2015, also halving#2) showed the start of previous bull run. The recent downtrend is yet to be broken.
Conslusion :
What do we need to check in the next weeks / months according to this analysis ?
1) Breakout of OBV downtrend (full bullish scenario)
2) Bounce on Support 1 & then Breakout on OBV (bearish & then bullish)
3) Bounce on Support 2 (overwhelmingly bearish mid term)
I think (hope ?) that support 2 is history and won't be used anymore (OBV is not an oscillator : it shows cumulative volumes. So unlike RSI for instance, we do not have to go back to these lines). Going back to a previous level of OBV support would be a very bad sign for Bitcoin.
Please share your views with me ! And opinions about the article. Charting/writing can easily take hours, please show some love :)
Indifference is worse than criticism (this is true for me & for other fellow TV authors).
The main chart does not look like what I wanted. To make it look as I had planned, please minimize the indicator (pull the middle line towards the bottom)
Today we'll be looking at how price has reacted to previous ATH Monthly candle closes.
Before that, one word about what a Cup & Handle is : It is a pattern sharing similarities with an ascending triangle. It shows where an extremely strong resistance is located, how price is being rejected a first time, then consolidates below it, and eventually, if the resistance breaks, it is a very good buy signal with a safe Stop-loss. On large timeframes, consolidation patterns like this one, are extremely reliable and do not necessarily need many more indicators.
Chart 1 & 2 (Main chart and chart above) : Cup & Handles from previous cycles & MA50.
Notice how the previous ATH monthly candle closes became strong resistances on the following market cycles ? After hitting the resistance, price pulls back, consolidates, and then breaks out a few months later. This has happened twice before, and there are signs that this could be happening once more. Right now :)
MA50 is the yellow line. It's been a useful support before so I left it here.
Cup & Handle 2011-2013 : Perfect C&H. The right border of the cup is at the same level as the left border, and the handle has a perfect size and shape. Breakout was done on the handle on that level too (previous ATH monthly close)
Cup & Handle 2014-2017 : not nearly as perfect : the right border of the cup did not reach the resistance and pulled back earlier. The pattern is still valid in my opinion : the breakout happened on the resistance, and price accelerated a lot after that level.
Chart 3 : Cup & Handle 2019 ?
Looking at the present. Price was rejected end June on the previous ATH monthly candle close, just like in previous cycles. With the A Version of the handle : the bottom is in (or not much room to go lower). That's the standard shape for a Cup & Handle : handle is much smaller than the cup.
B Version is an hypothesis using the MA50 as support. I'm considering it but the handle is not what you'd normally be expecting for a handle.
Chart 4 : OBV Analysis (lower part of the chart)
I've been looking at indicators to help me decide if Handle A is more likely than B. I'm still not sure, but here's food for thought using OBV.
I've found a few levels to look for on other indicators (tops & bottoms mostly), but they're not helping here. On OBV though, there are some very interesting confluence levels. I named them Support 1 & Support 2 on the chart. Price has reacted to these lines in the past. Also showing 2 downtrend lines (white) and one uptrend line (green). Unfortunately, the uptrend line has been broken recently. This is worrying, but there are not a lot of contact points on that line so maybe it's not doom time yet.
Previous OBV downtrend breakout (october/november 2015, also halving#2) showed the start of previous bull run. The recent downtrend is yet to be broken.
Conslusion :
What do we need to check in the next weeks / months according to this analysis ?
1) Breakout of OBV downtrend (full bullish scenario)
2) Bounce on Support 1 & then Breakout on OBV (bearish & then bullish)
3) Bounce on Support 2 (overwhelmingly bearish mid term)
I think (hope ?) that support 2 is history and won't be used anymore (OBV is not an oscillator : it shows cumulative volumes. So unlike RSI for instance, we do not have to go back to these lines). Going back to a previous level of OBV support would be a very bad sign for Bitcoin.
Please share your views with me ! And opinions about the article. Charting/writing can easily take hours, please show some love :)
Indifference is worse than criticism (this is true for me & for other fellow TV authors).
Note
1 point for cup & handle A.Let's see how it develops. I'm still in the denial state for now :)
Here's a chart I had in store for catching the bottom. Not sure it's going to be useful anymore.
credits to filbfilb for miner's bottom & TheTrex for liquidation screener.
The liquidation screener can be found
Trade active
Just a quick update, as I have nothing special to say you wouldn't already know. The OBV has had its breakout. It's not impressive yet but I guess it's enough to declare the bear market dead ? I'm waiting for more signs to go full long / leveraged but I'm happy to be in bitcoin already.Note
Here's a quick charted update.Great response from the OBV. Compression is taking form. The black swan event did not change the scenario as we've had a monthly close on the support level. I hope to see a new higher low and a breakout in the year to come.
Weekly TF analysis to follow soon.
Cheers, Harry.
Note
A quick update on that scenario.Looking good, and we have monthly support at 9500+.
I have bids in the 9700 area just in case we get a wick there, but will have to reasses if a bigger correction happens.
Fa/news wise, lots of bullishness that should help pass the resistance. Miners not selling, hash rate healthy, active btc adresses higher than at the 2019 peak. Large investors and companies buying BTC, new "all weather" portfolios including bitcoin, banks diversifying into cryptos...
Have to be ready for a shakeout though : Covid phase 2 should happen, gold could have a correction...
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