Crypto weather 2019: Brief respite before the torrential pain!
Good day Traders,
Bitcoin has a number of bullish signals for the short term, however, we are probably still printing a large bear flag, consolidating before 1 last bounce and then we resume the downtrend. Within the flag, we have a diamond bottom pattern playing out, with added resistance coming from our daily SMA50, and added support coming from the weekly SMA200, as well as the flag (uptrend support from our 2018).
A diamond can break in both directions, however for the short term, the weekly SMA200 will be much stronger support than the daily SMA50 acting as resistance. The price should be squeezed between daily SMA50 and flag/diamond support, before we break to the upside from the diamond apex above the daily SMA50, before we go on to test our daily SMA100.
We also have regular bullish divergence on the daily MFI after that large drop to our flag support yesterday and the $3400 support has been holding strong, with a lot of buying pressure beneath $3400. We could potentially have a flash crash to our $3300-$3330 support, but I doubt that we will drop below our weekly SMA200. If we do drop below $3370, this would revise our flag support to a more gradual angle and our flag resistance would probably be limited to around $4200.
We have also now had a 78.6 fib retracement after the bounce from our 2018 low to our recent high of $4236, which tells me that the downtrend is still strong, so when we do bounce from these levels as we break out from the diamond apex, I believe our upside will be limited to a 127.2 - 138.2 fib extension target of between $4540 - $4690.
On log scale, this $4540 - $4690 area of resistance is also where we will find major downtrend resistance from our ATH. Although it doesn't seem to matter if you use log or linear because no matter how you look at it, log or linear, we have trend line resistance. On log, this is from our ATH, and with linear, this is from our 24 July swing high. This is also where we will be retesting our daily SMA100 so expecting strong resistance.
This is where I believe we will drop back to flag support and break to the downside with a large downside target based on the height of the flag pole. When we had our drop from $5658 to our flag support and 2018 low, we then only had a 38.2 fib retracement on the bounce, which tells me that the trend is still very much to the downside, considering that we had no expected v-shaped bounce, i.e none of the expected buying pressure, no capitulation candle on the drop, and volume has been dropping gradually ever since, setting up for the next major drop. We also had a downward cross on the weekly stochrsi.
I'm expecting a 1.382-1.414 fib extension target for the drop from $5658, to somewhere between $2150 - $2070, which lines up nicely with the target of the larger bear flag when it breaks down (pole height from $6544 to our 2018 low).
Looking at the fib extension target for the flag pole, once we reach our flag resistance between $4540 - $4690, that will be a 38.2 fib retracement after our main drop from $6544. When we drop from there, we will be resuming the general downtrend and I have a final 161.8 fib extension target of $1007. This means that when we reach the lower $2ks, I suspect that we will have a strong bounce to potentially retest the flag as resistance, as the herd starts to fomo when they begin calling the bottom, however this will be a bull trap, and we will head back to retest our lower $2k support, dropping to the 138.2 fib extension support of the larger move, around $1800.
This part of the drop is significant, because this will be a break of market structure, as we break major uptrend support, starting from our 2013 swing low. This will induce panic when we can't get back above this support, and this is where I believe that our true capitulation event will take place, as we crash below $1k, and the initial uptrend support from the start of our bull cycle in 2015, to major horizontal support close to $800. This will be considered the "despair" phase of the market bubble and will be the final drop before the bears eventually throw in the towel and we bounce back above that initial uptrend as the price finally reverts back to the mean, before consolidating and beginning a new market cycle.
$1007 is the 161.8 fib extension target of the larger move and fits in with Tyler Jenk's Hyperwave theory quite well.
Good luck and happy trading!
Diamond Bottom / Flag:
Previous post:
Bitcoin has a number of bullish signals for the short term, however, we are probably still printing a large bear flag, consolidating before 1 last bounce and then we resume the downtrend. Within the flag, we have a diamond bottom pattern playing out, with added resistance coming from our daily SMA50, and added support coming from the weekly SMA200, as well as the flag (uptrend support from our 2018).
A diamond can break in both directions, however for the short term, the weekly SMA200 will be much stronger support than the daily SMA50 acting as resistance. The price should be squeezed between daily SMA50 and flag/diamond support, before we break to the upside from the diamond apex above the daily SMA50, before we go on to test our daily SMA100.
We also have regular bullish divergence on the daily MFI after that large drop to our flag support yesterday and the $3400 support has been holding strong, with a lot of buying pressure beneath $3400. We could potentially have a flash crash to our $3300-$3330 support, but I doubt that we will drop below our weekly SMA200. If we do drop below $3370, this would revise our flag support to a more gradual angle and our flag resistance would probably be limited to around $4200.
We have also now had a 78.6 fib retracement after the bounce from our 2018 low to our recent high of $4236, which tells me that the downtrend is still strong, so when we do bounce from these levels as we break out from the diamond apex, I believe our upside will be limited to a 127.2 - 138.2 fib extension target of between $4540 - $4690.
On log scale, this $4540 - $4690 area of resistance is also where we will find major downtrend resistance from our ATH. Although it doesn't seem to matter if you use log or linear because no matter how you look at it, log or linear, we have trend line resistance. On log, this is from our ATH, and with linear, this is from our 24 July swing high. This is also where we will be retesting our daily SMA100 so expecting strong resistance.
This is where I believe we will drop back to flag support and break to the downside with a large downside target based on the height of the flag pole. When we had our drop from $5658 to our flag support and 2018 low, we then only had a 38.2 fib retracement on the bounce, which tells me that the trend is still very much to the downside, considering that we had no expected v-shaped bounce, i.e none of the expected buying pressure, no capitulation candle on the drop, and volume has been dropping gradually ever since, setting up for the next major drop. We also had a downward cross on the weekly stochrsi.
I'm expecting a 1.382-1.414 fib extension target for the drop from $5658, to somewhere between $2150 - $2070, which lines up nicely with the target of the larger bear flag when it breaks down (pole height from $6544 to our 2018 low).
Looking at the fib extension target for the flag pole, once we reach our flag resistance between $4540 - $4690, that will be a 38.2 fib retracement after our main drop from $6544. When we drop from there, we will be resuming the general downtrend and I have a final 161.8 fib extension target of $1007. This means that when we reach the lower $2ks, I suspect that we will have a strong bounce to potentially retest the flag as resistance, as the herd starts to fomo when they begin calling the bottom, however this will be a bull trap, and we will head back to retest our lower $2k support, dropping to the 138.2 fib extension support of the larger move, around $1800.
This part of the drop is significant, because this will be a break of market structure, as we break major uptrend support, starting from our 2013 swing low. This will induce panic when we can't get back above this support, and this is where I believe that our true capitulation event will take place, as we crash below $1k, and the initial uptrend support from the start of our bull cycle in 2015, to major horizontal support close to $800. This will be considered the "despair" phase of the market bubble and will be the final drop before the bears eventually throw in the towel and we bounce back above that initial uptrend as the price finally reverts back to the mean, before consolidating and beginning a new market cycle.
$1007 is the 161.8 fib extension target of the larger move and fits in with Tyler Jenk's Hyperwave theory quite well.
Good luck and happy trading!
Diamond Bottom / Flag:
Previous post:
Comment:
**Edit: If we drop close to our weekly SMA200 support, then the flag resistance should be somewhere between $4400-$4550.
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