Bitcoin (BTCUSD) Bouncing Within a Pennant? A Move Downwards?
Updated
Hello friends,
It's hard to believe that so much time has passed; 2019 has arrived quickly! I have been occupied with some things, along with plans for further study on the markets, but my curiosity recently came back and I decided to make a small analysis on the current situation.
It seems Bitcoin has continued the move downwards, reaching as low as the larger-trend support at ~$3200! I have to admit, it was surprising to see it break through $5000 so violently.
Looking at the daily for the past few months, it is clear that Bitcoin has been consolidating within a symmetrical triange. An upper resistance line can be identified at three points (around November 28th, December 20th, and January 7th), along with a lower support line at two points (December 15th, and February 7th). This movement has also established a minor resistance area around $3750, which I have marked with a green line and a shaded area to better represent the general scope.
On the smaller scale, the move upwards which started around the 8th of February seems to be moving in a channel. This piece of the analysis is more of an educated guess, as the pause that started around the 18th happens to also have occurred at a line which happens to have the same angle as one drawn from the lower two.
Depending on how things go, Bitcoin can either fly or fall from here. At the moment, I'm more convinced that Bitcoin will fall to around $3750, make a small retrace, and continue downwards towards the lower support. There are a few reasons why I'm favoring this idea:
1. Hitting the top of a strongly established resistance line usually leads to a bounce downwards.
2. The RSI and Stoch RSI seem to flagging it as overbought at the moment, and there is thus reason to believe that Bitcoin has some room to fall.
3. The volume shown in the move upwards at around the 18th of February is less than the volume shown in the previous two larger moves upwards. If I remember correctly, this is a sign of consolidation and tightening.
4. While not visualized here, there is arguably an inverted head and shoulders from January 10th to February 18th. Taking the distance from the neckline to the head and adding it to the breakout point, it targets around the area we are in right now, and retraces usually follow large movements.
A breakout is also completely possible here, and if it does manage to defeat the odds, we may likely fly as high as $5000 (maybe a bold claim at this point) with retraces at the resistance areas formed from the initial move which broke through $5000.
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The two possibilities are therefore as follows:
Scenario A: Bounces off of the upper resistance line, heads downwards, a small retrace off of the established general support area, and a continued move downwards to support.
Scenario B: Volume accelerates and the price makes a move upwards.
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While I am leaning strongly towards shorting as the more probable option, it is definitely possible that a breakout occurs, so it is worth watching at the moment. It is going to be a while for this all to unfold, so there will be a lot of time in general in the next month or so to look at this trade.
The same aphorism from 2018, and all the years before, still applies in 2019 - please trade with care. And, as always, I wish the best to all traders in this new year!
On a minor, and carefree note, since it's been a while, my chart drawings are likely not as great as they should be, but I hope they're readable! :P
It's hard to believe that so much time has passed; 2019 has arrived quickly! I have been occupied with some things, along with plans for further study on the markets, but my curiosity recently came back and I decided to make a small analysis on the current situation.
It seems Bitcoin has continued the move downwards, reaching as low as the larger-trend support at ~$3200! I have to admit, it was surprising to see it break through $5000 so violently.
Looking at the daily for the past few months, it is clear that Bitcoin has been consolidating within a symmetrical triange. An upper resistance line can be identified at three points (around November 28th, December 20th, and January 7th), along with a lower support line at two points (December 15th, and February 7th). This movement has also established a minor resistance area around $3750, which I have marked with a green line and a shaded area to better represent the general scope.
On the smaller scale, the move upwards which started around the 8th of February seems to be moving in a channel. This piece of the analysis is more of an educated guess, as the pause that started around the 18th happens to also have occurred at a line which happens to have the same angle as one drawn from the lower two.
Depending on how things go, Bitcoin can either fly or fall from here. At the moment, I'm more convinced that Bitcoin will fall to around $3750, make a small retrace, and continue downwards towards the lower support. There are a few reasons why I'm favoring this idea:
1. Hitting the top of a strongly established resistance line usually leads to a bounce downwards.
2. The RSI and Stoch RSI seem to flagging it as overbought at the moment, and there is thus reason to believe that Bitcoin has some room to fall.
3. The volume shown in the move upwards at around the 18th of February is less than the volume shown in the previous two larger moves upwards. If I remember correctly, this is a sign of consolidation and tightening.
4. While not visualized here, there is arguably an inverted head and shoulders from January 10th to February 18th. Taking the distance from the neckline to the head and adding it to the breakout point, it targets around the area we are in right now, and retraces usually follow large movements.
A breakout is also completely possible here, and if it does manage to defeat the odds, we may likely fly as high as $5000 (maybe a bold claim at this point) with retraces at the resistance areas formed from the initial move which broke through $5000.
=======================================================================================================================
The two possibilities are therefore as follows:
Scenario A: Bounces off of the upper resistance line, heads downwards, a small retrace off of the established general support area, and a continued move downwards to support.
Scenario B: Volume accelerates and the price makes a move upwards.
=======================================================================================================================
While I am leaning strongly towards shorting as the more probable option, it is definitely possible that a breakout occurs, so it is worth watching at the moment. It is going to be a while for this all to unfold, so there will be a lot of time in general in the next month or so to look at this trade.
The same aphorism from 2018, and all the years before, still applies in 2019 - please trade with care. And, as always, I wish the best to all traders in this new year!
On a minor, and carefree note, since it's been a while, my chart drawings are likely not as great as they should be, but I hope they're readable! :P
Note
Seems like a break upwards has occurred! Seems to suggest targeting $4300
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