Bear trap before a dead cat bounce?
Updated
Good day Traders
Bitcoin has been battling with our DMA50 resistance, is now printing hidden bearish divergence on the daily, and we have potential for bearish DI cross looming.
The recent short squeeze managed a 38.2 fib retracement after our drop from our 24 December swing high, so I have a 168.1 fib extension target of $2780 if we fail to get above DMA50.
Although we had a strong volume candle on the squeeze, we lacked any volume follow-through for a continuation of a rally, and once we reached DMA50, our buying volume dropped off, unlike the build up of buying volume when we bounced from our December lows.
A healthy rally would entail us taking the stairs up and elevator down but this was an elevator straight to our DMA50 resistance.
We could potentially have a drop / bear trap from here, breaking below WMA200 to set new lows, invalidating the triangle from my previous chart and forming support of a large falling wedge, triggering stops just below 3k.
Bitcoin should then have a dead cat bounce, first back above WMA200, then to wedge resistance, and then a breakout with a $4200-$4400 resistance target sometime towards the end of March / start of April.
When btc reaches $4200, I suspect we'll encounter strong horizontal resistance as we have since we dropped below $4500 in November last year and we should meet our DMA100.
Depending on the strength of trend and bottom-calling fomo, we should have a 38.2 fib retracement back to our 61.8 fib support, somewhere around $3670, which will give us 168.1 fib bull trap extension target of $5110 (to DMA200) once we break above that $4240 - $4480 and DMA100 resistance.
If we have a deeper 50 fib retracement to $3500, I'll revise my bull trap target to $4770, which would be a 138.2 fib extension target.
We should then potentially drop back to our 3k support, extending the bear market, with a move to new sub $2500 lows.
Have a look at the NVT indicator which gives us a network value to transactions ratio and has been quite accurate so far on the daily chart for predicting the bottom/top.
You'll see that we're in a great buy area on the weekly chart (flashes green for buy red for sell), but we still haven't bottomed yet on the daily chart, and you'll see that there was only 1 day where it flashed green in 2015 and that was during capitulation.
Previous chart and potential to new lows from here:
Scenario where we've already bottomed:
Another bearish scenario:
Bitcoin has been battling with our DMA50 resistance, is now printing hidden bearish divergence on the daily, and we have potential for bearish DI cross looming.
The recent short squeeze managed a 38.2 fib retracement after our drop from our 24 December swing high, so I have a 168.1 fib extension target of $2780 if we fail to get above DMA50.
Although we had a strong volume candle on the squeeze, we lacked any volume follow-through for a continuation of a rally, and once we reached DMA50, our buying volume dropped off, unlike the build up of buying volume when we bounced from our December lows.
A healthy rally would entail us taking the stairs up and elevator down but this was an elevator straight to our DMA50 resistance.
We could potentially have a drop / bear trap from here, breaking below WMA200 to set new lows, invalidating the triangle from my previous chart and forming support of a large falling wedge, triggering stops just below 3k.
Bitcoin should then have a dead cat bounce, first back above WMA200, then to wedge resistance, and then a breakout with a $4200-$4400 resistance target sometime towards the end of March / start of April.
When btc reaches $4200, I suspect we'll encounter strong horizontal resistance as we have since we dropped below $4500 in November last year and we should meet our DMA100.
Depending on the strength of trend and bottom-calling fomo, we should have a 38.2 fib retracement back to our 61.8 fib support, somewhere around $3670, which will give us 168.1 fib bull trap extension target of $5110 (to DMA200) once we break above that $4240 - $4480 and DMA100 resistance.
If we have a deeper 50 fib retracement to $3500, I'll revise my bull trap target to $4770, which would be a 138.2 fib extension target.
We should then potentially drop back to our 3k support, extending the bear market, with a move to new sub $2500 lows.
Have a look at the NVT indicator which gives us a network value to transactions ratio and has been quite accurate so far on the daily chart for predicting the bottom/top.
You'll see that we're in a great buy area on the weekly chart (flashes green for buy red for sell), but we still haven't bottomed yet on the daily chart, and you'll see that there was only 1 day where it flashed green in 2015 and that was during capitulation.
Previous chart and potential to new lows from here:
Scenario where we've already bottomed:
Another bearish scenario:
Note
**Edit: Recent long squeeze not short squeeze
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