BTC: How to Prepare for the Breakout - Volume, CME Gap Explained
Updated
Hello traders, after yesterday's eventful "news" breakout, we saw a strong spike giving Bitcoin another chance to go for the upside. We are saw a small surge in price, but nothing to write home about, at least yet. Let's talk about the important factors on why Bitcoin is not out of the woods, until proven otherwise via a few indicators and technical patterns. I will also explain the alternate bearish to bullish scenario from a visualization standpoint.
Bitcoin's Volume + 50M buy from the company, 'SQUARE"
Bitcoin's price surge yesterday had no real follow up on the smaller time frames, making Bitcoin's bull traders a bit cautious, especially on the 1H timeframe. We are also seeing that Bitcoin was not able to break higher than 10.9K, which is a strange phenomenon due to the rather bullish news. Is this indicating that Bitcoin bears are still dominant in keeping pressure to stay below $11,000? This should be answered within the following days, if not hours. As stated, Bitcoin's surge of a few bullish candles led to Bitcoin's higher timeframe to not show the real strength. We can see that the 1D volume was closed with a rather mediocre volume candle compared with the previous weeks volume, respectively. This is what makes me 'cautiously optimistic', because we have seen much higher rallies even without such news.
CME Gap
The elephant in the room, is what I'd like to call it - and unfortunately many bulls will continuously disregard this issue and float past this issue. Bitcoin CME gaps have almost always statistically been shown to fill, regardless of any news. It has been the nature of Bitcoin's traditional 'gap filling' routine over the past few years. Filling it will be no surprise, and not filling it will be a big surprise. This is what makes me lean towards a more bearish perspective, still.
Trend Lines
Bitcoin's current major support and resistance trend lines is suggesting that Bitcoin is not out of the woods, technically making Bitcoin in a 'neutral' state. A clear break above $11,000 will be convincing, and switching bias would be key to making sure funds will be secured and not at a huge loss. We can see that Bitcoin is trading above the yellow support line (shown in the chart above), and below the white line (acting as resistance). As this is the 1D chart, yesterday's break out of the smaller trend line on the 4H does not make me instantly bullish.
How to Trade?
Trading Bitcoin's current price action relies heavily on luck, but remember, we can still have the higher probability by gathering as much evidence as we can. Here is a whole list of why I think Bitcoin is slightly leaning towards a drop:
1. Bitcoin has shown no true volume on the 1D candle, compared to the rest of the previous trading history.
2. CME Gap has not been filled, and is bound to fill sometime later. The sooner, the better - and the more bullish I can be.
3. We can see that Bitcoin is still trading between two major trend lines on the 1D chart, as shown above with the white and yellow line - both acting as a magnet for a tight trading range.
We can trade Bitcoin betting on the downside, as long as we keep a tight stop loss. We can also assume new possible trends. For example, Bitcoin is still trading within a larger parallel channel and if we breakdown, that is still considered bullish.
Bitcoin's Volume + 50M buy from the company, 'SQUARE"
Bitcoin's price surge yesterday had no real follow up on the smaller time frames, making Bitcoin's bull traders a bit cautious, especially on the 1H timeframe. We are also seeing that Bitcoin was not able to break higher than 10.9K, which is a strange phenomenon due to the rather bullish news. Is this indicating that Bitcoin bears are still dominant in keeping pressure to stay below $11,000? This should be answered within the following days, if not hours. As stated, Bitcoin's surge of a few bullish candles led to Bitcoin's higher timeframe to not show the real strength. We can see that the 1D volume was closed with a rather mediocre volume candle compared with the previous weeks volume, respectively. This is what makes me 'cautiously optimistic', because we have seen much higher rallies even without such news.
CME Gap
The elephant in the room, is what I'd like to call it - and unfortunately many bulls will continuously disregard this issue and float past this issue. Bitcoin CME gaps have almost always statistically been shown to fill, regardless of any news. It has been the nature of Bitcoin's traditional 'gap filling' routine over the past few years. Filling it will be no surprise, and not filling it will be a big surprise. This is what makes me lean towards a more bearish perspective, still.
Trend Lines
Bitcoin's current major support and resistance trend lines is suggesting that Bitcoin is not out of the woods, technically making Bitcoin in a 'neutral' state. A clear break above $11,000 will be convincing, and switching bias would be key to making sure funds will be secured and not at a huge loss. We can see that Bitcoin is trading above the yellow support line (shown in the chart above), and below the white line (acting as resistance). As this is the 1D chart, yesterday's break out of the smaller trend line on the 4H does not make me instantly bullish.
How to Trade?
Trading Bitcoin's current price action relies heavily on luck, but remember, we can still have the higher probability by gathering as much evidence as we can. Here is a whole list of why I think Bitcoin is slightly leaning towards a drop:
1. Bitcoin has shown no true volume on the 1D candle, compared to the rest of the previous trading history.
2. CME Gap has not been filled, and is bound to fill sometime later. The sooner, the better - and the more bullish I can be.
3. We can see that Bitcoin is still trading between two major trend lines on the 1D chart, as shown above with the white and yellow line - both acting as a magnet for a tight trading range.
We can trade Bitcoin betting on the downside, as long as we keep a tight stop loss. We can also assume new possible trends. For example, Bitcoin is still trading within a larger parallel channel and if we breakdown, that is still considered bullish.
Note
Here is another idea, based on fib levels.
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