Short

BTC - Potential Head and Shoulders Pattern - Swing Trade

Here's the details of my potential trade Short on BTC....

Daily Chart:
- Head and Shoulders Pattern
- Break and weak retest of 50 day moving average

4hr Chart:
- Death Cross 50 MA over 200 MA (first time since Sep 4, 2024)

Recent Developments & News
- See my SPX Idea, the S&P has both a Rising Wedge and Head and Shoulders, making the overall market susceptible to a short term bear move which will be a headwind for BTC given its correlation to the market
- USA Strategic Bitcoin Reserve has made a lot of headlines and driven increased excitement about Bitcoin. However, recent comments suggest this will not be a quick decision and is not something that is relevant in the immediate term...
- In terms of the legal issues around holding bitcoin, "that's the kind of thing for Congress to consider, but we are not looking for a law change at the Fed," Powell said.
- Given the likely ways such a reserve could be created, "we suspect such a plan would face stiff resistance from the Fed," Barclays analysts said
- The European Central Bank’s chief bank supervisor, Claudia Buch, on Tuesday also flagged up risks in the crypto market, including "excessive leverage, transparency (and) conflict of interest", adding she was keeping a close eye on banks' exposure to that type of assets.
- In Europe, a series of central bankers this week dismissed any suggestion of bitcoin becoming a reserve asset.
- Belgium’s central bank governor Pierre Wunsch saw little "appetite for having reserves in bitcoins" in an interview on Wednesday.
- Outside the euro zone, Hungary’s governor-designate Mihaly Varga said on Monday cryptocurrencies were just too volatile.
- "We are following the discussion, especially in the U.S. post-elections, closely," ECB policymaker Olli Rehn said on Tuesday. "But our view has not changed. Cryptos are assets, but they are not currency," the Finnish central bank governor added.

Note:
Trump plans to appoint former PayPal executive David Sacks to the newly-created position of White House AI and Crypto Czar, and pro-crypto consultant Paul Atkins to lead the Securities and Exchange Commission. That said, the discussion and possible policy changes are possible, just not immediate.

In addition, Michael Saylor has made a lot of news with recent Bitcoin purchases and the potential for issuing shares at MicroStrategy to fund additional BTC purchases. If the shares issuance is approved it could trigger a wave of bullish activity, however the actions and purchases being taken are in consideration of a long term view for BTC and therefore may have less impact on the short term pattern. Noted in Risks below.

Target:
- Head 108k
- Neckline 92k
- Target Move: 16k
- Target Price: 76k-80k (13-15%)
- Stop: A break above
- The Head and Shoulders Pattern has taken ~41 days to form
- The expected timeframe is 1/3 the days to formation so ~13-15 days to target

Risks:
- Bitcoin is currently in a long term cup and handle pattern with a target of 123k, therefore this suggested price action is considered short term and to have risks of the pattern failing
- Bitcoin has made a very strong move over the past 4 months, therefore it easily can continue it's upwards momentum
- Approval of MSTR share issuance could trigger a wave of bullishness in Bitcoin, breaking the pattern
- Trump Inauguration Jan 20th could spark a wave of bullishness as anticipation for new policy takes hold

Overall:
Bitcoin is currently in a long term, very bullish cup and handle pattern with a target of 123k. Therefore, I'm not in any rush to take a short position in BTC given it's very bullish trends and volatility. However, the head and shoulders pattern formed with resistance at the long term upward trendline paired with short term weakness in the broader market makes it a strong case for a short term downward movement. The risk/reward ratio makes it a viable trading opportunity. See below the details of my trade consideration...

Currently no position, however, preparing for position if....
- BTC breaks below the neckline 92,000
- Retest and fail of the neckline at 92,000
- Broader market decline, particularly S&P Head and Shoulders pattern breakdown

Planned position in IBIT
5 Put Options
$52 Strike, Estimated price at entry near $52-$53
Expiration Friday Jan 25th
Target average price is $2.00 a contract
Investment $1000
Target Asset Price $44-$45
Time of Trade: up to 15 days
Target Option Price $8-$10 (6-8:1 Profit Loss Ratio)
Stop $1.00
Potential Loss -$500
Potential Gain $3000-$4000

4 days ago

Note

Yesterday's move on BTC pushed it a bit higher, however, to overcome the current bearish pattern it needs to break 100k. If BTC can't push back above the 200 MA on the 4hr chart and/or move above 100k, it may trace back to test breaking the neckline.

If BTC does break above 100k, that would be very bullish, and it could completely invalidate the H&S pattern and retest the ATH.

I have no position in BTC at the moment, but waiting patiently for either to pan out. Cheers

5 hours ago

Note

The recent move up past 100k is bullish. However, reviewing the volume on the charts, this latest push from 92k to 100k comes on low volume and also substantiates a true right shoulder on the H&S pattern.

If BTC can keep momentum and push above 103.5k than it has legs. However, if it falls below 100k and the overall market becomes weak, it could move towards potentially forming a true H&S neckline break.

No position, still waiting

jaytmarquardt

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