Mapping New Landscapes in Bitcoin (Part 1)
The structure of new landscapes is always unknown at first. But if you've ever been hiking, you know there are characteristics that never change. Maybe there's a path in the woods, a consistent slope, or the sound of water. You might look behind and think, "I know so much about where I was, but how do I move forward without the same knowledge of this new terrain?"
We know so much about Bitcoin's landscape below the H&S neckline. Maybe someday you'll remember it as simpler times. But that's a fallacy. There are never simpler times, only familiar ones. For a long time under the neckline we knew nothing, but that didn't stop us from trading. Just because a landscape is new and unfamiliar doesn't mean we shouldn't move forward. Just update your map and don't fall off a cliff, this is all we can expect from ourselves as traders.
In this series of posts, I’ll be explaining our updated map of Bitcoin’s new landscape, layer by layer.
Part 1 - Historical Prices: Looking Above the Trees
If you want to know where you're going, you need to find out where you are in relation to where you've been. Bitcoin's daily chart provides us with this vantage point. Obviously our breakout at the $6,820 H&S neckline is now a strong support, after repeated attempts to break it as a resistance, so we mark it as such on our chart and paint it blue. But the higher ground of the daily chart shows that our most recent pullback above the neckline had $7,080 as a strong support. This should have acted as a resistance during our breakout, and for a few minutes it did, but a short squeeze took place. Everyone that had been waiting on the sidelines for confirmation of a reversal bought the breakout, and this triggered a squeezing of all the short positions that had accumulated over a month. Now, with the $7,080 resistance neutralized, we can mark it as a support, but not a strong support because it was broken on only its second attempt and is not as significant as $6,820.
This recent pullback before the H&S neckline also gives us two more resistances to consider, $7,380 and $7,780. $7,380 acted as a weak support during this pullback. First it was a support, then it was a resistance, then it was a support again, and then the support was broken. Clearly this is an important price, because we are currently struggling to have a daily close above it, but it was never a strong price because it never produced a significant pullback. So let’s color it red, but only mark it as a weak resistance. If we have a daily close above it, we can then turn it blue and call it a weak support. $7,780, however, is the more significant price to consider. It defended against the pullback twice and the second attempt triggered a $1,600 drop. This makes $7,780 is our strongest and most important resistance right now. It's also confirmed by PRO Sinewave’s daily bearish cycle line, and could very well be the top of our first pullback from this bull run. Obviously, we mark it accordingly.
So what about $7,900? What about $8,000? What about $10,000? What about muh moon? These are legitimate prices (well, some of them) that I will cover throughout this series using other support and resistance methods. But until then, ignore the TA echo chamber, ignore the word on the street, ignore the euphoric herd, follow the Goldilocks ideal-aggressive price rule, and create your own map. In the next post I’ll explain the next layer of my map, Fibonacci levels.
Part 2 - Fibonacci Levels: Follow a Natural Path
We know so much about Bitcoin's landscape below the H&S neckline. Maybe someday you'll remember it as simpler times. But that's a fallacy. There are never simpler times, only familiar ones. For a long time under the neckline we knew nothing, but that didn't stop us from trading. Just because a landscape is new and unfamiliar doesn't mean we shouldn't move forward. Just update your map and don't fall off a cliff, this is all we can expect from ourselves as traders.
In this series of posts, I’ll be explaining our updated map of Bitcoin’s new landscape, layer by layer.
Part 1 - Historical Prices: Looking Above the Trees
If you want to know where you're going, you need to find out where you are in relation to where you've been. Bitcoin's daily chart provides us with this vantage point. Obviously our breakout at the $6,820 H&S neckline is now a strong support, after repeated attempts to break it as a resistance, so we mark it as such on our chart and paint it blue. But the higher ground of the daily chart shows that our most recent pullback above the neckline had $7,080 as a strong support. This should have acted as a resistance during our breakout, and for a few minutes it did, but a short squeeze took place. Everyone that had been waiting on the sidelines for confirmation of a reversal bought the breakout, and this triggered a squeezing of all the short positions that had accumulated over a month. Now, with the $7,080 resistance neutralized, we can mark it as a support, but not a strong support because it was broken on only its second attempt and is not as significant as $6,820.
This recent pullback before the H&S neckline also gives us two more resistances to consider, $7,380 and $7,780. $7,380 acted as a weak support during this pullback. First it was a support, then it was a resistance, then it was a support again, and then the support was broken. Clearly this is an important price, because we are currently struggling to have a daily close above it, but it was never a strong price because it never produced a significant pullback. So let’s color it red, but only mark it as a weak resistance. If we have a daily close above it, we can then turn it blue and call it a weak support. $7,780, however, is the more significant price to consider. It defended against the pullback twice and the second attempt triggered a $1,600 drop. This makes $7,780 is our strongest and most important resistance right now. It's also confirmed by PRO Sinewave’s daily bearish cycle line, and could very well be the top of our first pullback from this bull run. Obviously, we mark it accordingly.
So what about $7,900? What about $8,000? What about $10,000? What about muh moon? These are legitimate prices (well, some of them) that I will cover throughout this series using other support and resistance methods. But until then, ignore the TA echo chamber, ignore the word on the street, ignore the euphoric herd, follow the Goldilocks ideal-aggressive price rule, and create your own map. In the next post I’ll explain the next layer of my map, Fibonacci levels.
Part 2 - Fibonacci Levels: Follow a Natural Path
Part 2 of this series of analyses is up. Finding Natural Paths with Fibonacci Levels.