Merry Christmas 2019! Your gift? Bitcoin at 3K! A Short Scenario
Hi All,
Wow, what a couple of months... and weeks... and days... and hours! What the hell is going on with BTC!?
Now I know this post may get taken the wrong way to begin with so lets lay a few ground rules first;
1. This is just a scenario. Nobody really knows what BTC is going to do next, so no, I'm not claiming to predict the future.
2. I know the pattern is somewhat incomplete but I address this in my TA.
2.1. In saying the above, I have published this idea as a possible pathway that BTC might take downward, should we have a confirmed downtrend, with the intention of a retrace.
Now the supporting TA;
Head & Shoulders Pattern
I have started the analysis with the pattern as it is arguably the weakest element of TA on the chart. We do not have a right shoulder forming yet, let alone a confirmed neckline! There are a few confirming factors we can consider however. In order for the proposed neck line to be confirmed (or touched at the least), we would need to break the 38.2 fib line, break the trend line established since April (labeled 20MA trendline which we will get to later), and dip below the 50MA. A considerable task. There is one recurrence though which works in this patterns favor;
The period displayed above shows the highest number of 38.2 fib line tests both as resistance and support. There is noticeable confluence with the MACD indicator, as every positive MACD cycle clearly coincides with a hold of the fib line, whereas every negative cycle coincides with a break of the fib line.
If we now look at the current chart you will notice MACD is about to cross into negative cycle. Additionally, considering the previous MACD cycle took 15 days, and assuming this cycle is around the same, we actually provision a perfect amount of time for price action to reach our hypothetical neckline.
The case for this point to act as a pivot is double edged; The neckline suggested by the first shoulder is in perfect confluence with the trend line set since the break out in April (labelled 50MA trendline). Both of these as well as the fact that the 8400-8500 price range has been a traditional level for support/resistance previously suggest that this support line may be too strong to breach at an initial attempt.
The case for the subsequent bounce and pullback to and from the right shoulder is as follows; The 10K mark has psychological value and there would be interest in retesting this price from a retail perspective. This same 10k mark has also acted as support/resistance previously. Our trend line from April would be tested as resistance in confluence (labelled 20MA trend-line), and an attempt at breach of the 38.2 fib level would also occur.
It is at this point where i think it is crucial if this pattern is to succeed or fail, as well as strong signalling for short to mid term trend confirmations. We could see the right shoulder creep a little higher for example but any serious breach of the 50 fib line would largely invalidate this analysis. For the idea to be viable, all levels of resistance must hold for the formation of the right shoulder.
Following this is the confirmation of the pattern, which is the break of the neckline. In order to do so price action would need to break the trend line established since April (50MA Trendline) a significant milestone. This would ultimately be the second attempt and would signal the end of this mid term uptrend. The distance from head to neckline, measured from the assumed trend line breach provides us with a possible target of 3K. To achieve this target we would need to breach the final ascending trend line established back in DEC of last year as well as the 200 MA, technically (and in all reality) plunging us once again into a bear market.
Should the above occur, 2019 would have obviously not been the year the new BTC Bullrun started.
MA's and MA Trendlines
There are a number of trend lines drawn on the chart; 7MA TL (Trendline), 20MA TL, 50MA TL, 200MA TL, and lastly the major trend established in DEC last year. The 200MA TL is at deviation, at a steeper angle and degree, to the major trend line, just as the 50MA TL is at deviation, at a steeper angle and degree to the 200MA TL so and and so forth all the way to the 7MA TL. This is in perfect confluence with the parabolic nature of BTC's recent rise. I have assigned each TL an MA as each MA should touch or get in close proximity to each of the red dots marked on the suggested H&S price trajectory and trendlines following a H&S price pattern. Should the pattern materialise, we should start to see a downward trajectory for the 7, 20 and 50 Ma's which should be in or around those points. This is not support for this analysis as such, but additional chart occurence that we might expect so see.
MACD & Histogram
MACD is clearly showing signs of turning to negative cycle. We also currently have the lines touching the upper half of the symmetrical triangle providing BTC with ample room for downard price action. Histogram has also confirmed the start of a negative trend albeit a weak one at this stage.
VOLUME
This is actually one of the most telling indicators. We simply do not have anywhere near the same volume leading up to the bull run of 2017. Obviously this is not support of the pattern occurring, but its strong support of a downward move however that may be. I don't think we can consider this the start of the bull run with these levels of volume not do I think these levels are enough to sustain an upward move let alone fend off a downward one.
VPVR
If we move our time frame to start from this years bottom, we will notice that our value profile sits 5K and below. This is in perfect confluence with the volume charts suggesting that we have not had wider participation in this current bull run and purchases above 5K have been in the minority. It also suggests that we don't have much resistance from a demand perspective at least until 4.5-5K opening up the reality or opportunity for BTC to revisit 3K.
Ichimoku Clouds
The H&S right shoulder would nicely retest Ichimoku as well as the aforementioned indicators prior to pattern confirmation. The more confluence the better. Confirmation of current down trend TBC by this indicator however, something to note.
Summary
The pattern is still forming, and as such, invalidation of this idea will be quick and swift. Overall my disposition is still a short on BTC in the mid-term based on various other indicators mentioned. Another revisit at the 3K level would need a new technical analysis for entry, but it would not be a bad assumption to think that a second visit to 3K should it occur, would act as a double bottom. Additionally with halving occurring next year as well as a maturing crypto market and participants we should have a better conditions to kickstart a new bullrun. Equity markets tanking late this year/ early next year would also be viewed positively from a crypto perspective.
Confirmation
Formation and confirmation of pattern.
Invalidation;
50% Fib test in short term.
General dissolution of pattern.
Thanks guys, leave a comment and let me know your thoughts,
Traders-Corner
***
Any trading advice provided has been prepared without taking into account your objectives, financial situation or needs. Before acting on the information provided you should consider the appropriateness of the information, having regard to your objectives, financial situation and needs. You should seek professional personal financial advice before making any financial or investment decisions.
All investment and trade decisions, no matter how well investigated, involve risk.
***
Wow, what a couple of months... and weeks... and days... and hours! What the hell is going on with BTC!?
Now I know this post may get taken the wrong way to begin with so lets lay a few ground rules first;
1. This is just a scenario. Nobody really knows what BTC is going to do next, so no, I'm not claiming to predict the future.
2. I know the pattern is somewhat incomplete but I address this in my TA.
2.1. In saying the above, I have published this idea as a possible pathway that BTC might take downward, should we have a confirmed downtrend, with the intention of a retrace.
Now the supporting TA;
Head & Shoulders Pattern
I have started the analysis with the pattern as it is arguably the weakest element of TA on the chart. We do not have a right shoulder forming yet, let alone a confirmed neckline! There are a few confirming factors we can consider however. In order for the proposed neck line to be confirmed (or touched at the least), we would need to break the 38.2 fib line, break the trend line established since April (labeled 20MA trendline which we will get to later), and dip below the 50MA. A considerable task. There is one recurrence though which works in this patterns favor;
The period displayed above shows the highest number of 38.2 fib line tests both as resistance and support. There is noticeable confluence with the MACD indicator, as every positive MACD cycle clearly coincides with a hold of the fib line, whereas every negative cycle coincides with a break of the fib line.
If we now look at the current chart you will notice MACD is about to cross into negative cycle. Additionally, considering the previous MACD cycle took 15 days, and assuming this cycle is around the same, we actually provision a perfect amount of time for price action to reach our hypothetical neckline.
The case for this point to act as a pivot is double edged; The neckline suggested by the first shoulder is in perfect confluence with the trend line set since the break out in April (labelled 50MA trendline). Both of these as well as the fact that the 8400-8500 price range has been a traditional level for support/resistance previously suggest that this support line may be too strong to breach at an initial attempt.
The case for the subsequent bounce and pullback to and from the right shoulder is as follows; The 10K mark has psychological value and there would be interest in retesting this price from a retail perspective. This same 10k mark has also acted as support/resistance previously. Our trend line from April would be tested as resistance in confluence (labelled 20MA trend-line), and an attempt at breach of the 38.2 fib level would also occur.
It is at this point where i think it is crucial if this pattern is to succeed or fail, as well as strong signalling for short to mid term trend confirmations. We could see the right shoulder creep a little higher for example but any serious breach of the 50 fib line would largely invalidate this analysis. For the idea to be viable, all levels of resistance must hold for the formation of the right shoulder.
Following this is the confirmation of the pattern, which is the break of the neckline. In order to do so price action would need to break the trend line established since April (50MA Trendline) a significant milestone. This would ultimately be the second attempt and would signal the end of this mid term uptrend. The distance from head to neckline, measured from the assumed trend line breach provides us with a possible target of 3K. To achieve this target we would need to breach the final ascending trend line established back in DEC of last year as well as the 200 MA, technically (and in all reality) plunging us once again into a bear market.
Should the above occur, 2019 would have obviously not been the year the new BTC Bullrun started.
MA's and MA Trendlines
There are a number of trend lines drawn on the chart; 7MA TL (Trendline), 20MA TL, 50MA TL, 200MA TL, and lastly the major trend established in DEC last year. The 200MA TL is at deviation, at a steeper angle and degree, to the major trend line, just as the 50MA TL is at deviation, at a steeper angle and degree to the 200MA TL so and and so forth all the way to the 7MA TL. This is in perfect confluence with the parabolic nature of BTC's recent rise. I have assigned each TL an MA as each MA should touch or get in close proximity to each of the red dots marked on the suggested H&S price trajectory and trendlines following a H&S price pattern. Should the pattern materialise, we should start to see a downward trajectory for the 7, 20 and 50 Ma's which should be in or around those points. This is not support for this analysis as such, but additional chart occurence that we might expect so see.
MACD & Histogram
MACD is clearly showing signs of turning to negative cycle. We also currently have the lines touching the upper half of the symmetrical triangle providing BTC with ample room for downard price action. Histogram has also confirmed the start of a negative trend albeit a weak one at this stage.
VOLUME
This is actually one of the most telling indicators. We simply do not have anywhere near the same volume leading up to the bull run of 2017. Obviously this is not support of the pattern occurring, but its strong support of a downward move however that may be. I don't think we can consider this the start of the bull run with these levels of volume not do I think these levels are enough to sustain an upward move let alone fend off a downward one.
VPVR
If we move our time frame to start from this years bottom, we will notice that our value profile sits 5K and below. This is in perfect confluence with the volume charts suggesting that we have not had wider participation in this current bull run and purchases above 5K have been in the minority. It also suggests that we don't have much resistance from a demand perspective at least until 4.5-5K opening up the reality or opportunity for BTC to revisit 3K.
Ichimoku Clouds
The H&S right shoulder would nicely retest Ichimoku as well as the aforementioned indicators prior to pattern confirmation. The more confluence the better. Confirmation of current down trend TBC by this indicator however, something to note.
Summary
The pattern is still forming, and as such, invalidation of this idea will be quick and swift. Overall my disposition is still a short on BTC in the mid-term based on various other indicators mentioned. Another revisit at the 3K level would need a new technical analysis for entry, but it would not be a bad assumption to think that a second visit to 3K should it occur, would act as a double bottom. Additionally with halving occurring next year as well as a maturing crypto market and participants we should have a better conditions to kickstart a new bullrun. Equity markets tanking late this year/ early next year would also be viewed positively from a crypto perspective.
Confirmation
Formation and confirmation of pattern.
Invalidation;
50% Fib test in short term.
General dissolution of pattern.
Thanks guys, leave a comment and let me know your thoughts,
Traders-Corner
***
Any trading advice provided has been prepared without taking into account your objectives, financial situation or needs. Before acting on the information provided you should consider the appropriateness of the information, having regard to your objectives, financial situation and needs. You should seek professional personal financial advice before making any financial or investment decisions.
All investment and trade decisions, no matter how well investigated, involve risk.
***
Comment:
We also have a symmetrical triangle formation. These break upwards 75% of the time. The 25% of the time they don't we can expect fake break outs to the top. At this stage
Any break upwards beyond the 12.5K would like invalidate this pattern, and any retest of previous highs would provide support to either a double top pattern or breaks to all new highs.
At this stage the likelihood of a H&S pattern completing are quite slim.
We also have a symmetrical triangle formation. These break upwards 75% of the time. The 25% of the time they don't we can expect fake break outs to the top. At this stage
Any break upwards beyond the 12.5K would like invalidate this pattern, and any retest of previous highs would provide support to either a double top pattern or breaks to all new highs.
At this stage the likelihood of a H&S pattern completing are quite slim.
Trade closed: stop reached:
More of a double top scenario unfolding, will be making a new analysis to accompany.
Our 7 day MA has hit the assumed spot. We can see at this stage that price action has recovered above the April trend-line (labelled 7MA Trend line) and subsequently above the 50% fib line. continued momentum above 12K would likely invalidate the above scenario, however we do see some weakness in the MACD and RSI indicators. Volume is a little mixed at this stage.
The real question is whether this temporary return to the upward trend line has the strength to remain sustained. Failure to do so would further support real testing of the 38.2% fib line.