Remember The "Failed" Inverted Head & Shoulders in May? BITCOIN!
Hi friends! Welcome to this update analysis on Bitcoin! Let's get right to it! Looking at the daily BTC chart, we can see that Bitcoin continues to advance toward the neckline of the inverse head and shoulders pattern. If you follow me on Twitter, or if you've been following my Litecoin posts, you know that I gave everyone a heads up that Bitcoin was likely to move higher, since Litecoin had broken out to the upside a day earlier. In fact, LTC has already broken out above it's inverse head and shoulders pattern, and is currently holding the neckline as support. However, her on BTC, we can see that price is still inside of the right shoulder. So, we still don't know for sure that BTC is going to break out to the upside of this inverted head and shoulders pattern. However, the fact that LTC has already done it, makes a BTC breakout increasingly likely.
Before we go any further, I want to address something that occasionally comes up in my comment sections, because it applies to the current market condition. For some reason, the MPC trolls out there love to harp on how I called for an inverted head and shoulders pattern in May of 2018, which actually failed to break out. They will tell you how bad I suck as an analyst, and that I told everyone to buy at the top of a move, etc. etc. Clearly, the people who say those things, didn't actually read those analyses, because I stated in every single one that we were in a "resistance zone" that "could cause a reversal," and that pattern breakouts are NOT guaranteed. If you would like to see for yourself, that analysis is linked below.
So, yeah, that concept applies very much to today. No pattern is guaranteed to break out. Does that mean that this isn't an inverted head and shoulders pattern? No. The formation in May was an inverted head and shoulders pattern too. It just didn't break out, much like I had warned in my analyses. Pattern failures are a normal part of technical analysis. It isn't my job to "predict," if a pattern is going to breakout or not. I have NO idea. I never claimed to have an idea of that at all. Nobody does, and if they say that they do, they're lying to you. Like I said, I don't make "predictions." I project where the market is likely to go, based on formations, breakouts, and other technicals in the market. That's what works. When it comes to formation trading, it's usually recommended to wait for confirmed breakouts before trading. Linking that concept to the current market condition, you all know that I went long at the exact bottom in BTC and LTC, after I gave you all the morning star reversal analysis, and told you that I had gone long. Now that BTC is approaching resistance in the right shoulder, I will not add to my long until I see a confirmed breakout. That's how I trade. If the market breaks down back below the neckline, or fails for example, I would then short to hedge my long, which I am not liquidating at this point.
So, yes, we could definitely see a failure here. I think that it's unlikely, but it is possible because the neckline is resistance, and the 50 EMA (in orange) is resistance, and we're right under both of them. We absolutely positively could fail here. In fact, during the analysis from May that I was just referring to, LTC had broken out above the neckline of it's inverted head and shoulders pattern, before BTC even tested it, exactly like today. However, LTC rolled back over, producing a failed breakout, and BTC just failed at the neckline. Nothing is guaranteed, until we see a nice breakout above the 50 EMA and the neckline of the inverted head and shoulders pattern. If, if, IF, that does happen, we would likely see a rally to the low 5000s, as BTC would reach resistance at the falling blue trendline. If we produce a big failure here, I expect the market to fall back down toward 3000.
Volume has been contracting on the chart, which is perfectly in line with the normal development of a head and shoulders pattern. Volume contracts as the pattern progresses, and then spikes on a successful breakout or a powerful failure. That's what we're looking for, one way or the other, to know the forward direction of the market.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-
Before we go any further, I want to address something that occasionally comes up in my comment sections, because it applies to the current market condition. For some reason, the MPC trolls out there love to harp on how I called for an inverted head and shoulders pattern in May of 2018, which actually failed to break out. They will tell you how bad I suck as an analyst, and that I told everyone to buy at the top of a move, etc. etc. Clearly, the people who say those things, didn't actually read those analyses, because I stated in every single one that we were in a "resistance zone" that "could cause a reversal," and that pattern breakouts are NOT guaranteed. If you would like to see for yourself, that analysis is linked below.
So, yeah, that concept applies very much to today. No pattern is guaranteed to break out. Does that mean that this isn't an inverted head and shoulders pattern? No. The formation in May was an inverted head and shoulders pattern too. It just didn't break out, much like I had warned in my analyses. Pattern failures are a normal part of technical analysis. It isn't my job to "predict," if a pattern is going to breakout or not. I have NO idea. I never claimed to have an idea of that at all. Nobody does, and if they say that they do, they're lying to you. Like I said, I don't make "predictions." I project where the market is likely to go, based on formations, breakouts, and other technicals in the market. That's what works. When it comes to formation trading, it's usually recommended to wait for confirmed breakouts before trading. Linking that concept to the current market condition, you all know that I went long at the exact bottom in BTC and LTC, after I gave you all the morning star reversal analysis, and told you that I had gone long. Now that BTC is approaching resistance in the right shoulder, I will not add to my long until I see a confirmed breakout. That's how I trade. If the market breaks down back below the neckline, or fails for example, I would then short to hedge my long, which I am not liquidating at this point.
So, yes, we could definitely see a failure here. I think that it's unlikely, but it is possible because the neckline is resistance, and the 50 EMA (in orange) is resistance, and we're right under both of them. We absolutely positively could fail here. In fact, during the analysis from May that I was just referring to, LTC had broken out above the neckline of it's inverted head and shoulders pattern, before BTC even tested it, exactly like today. However, LTC rolled back over, producing a failed breakout, and BTC just failed at the neckline. Nothing is guaranteed, until we see a nice breakout above the 50 EMA and the neckline of the inverted head and shoulders pattern. If, if, IF, that does happen, we would likely see a rally to the low 5000s, as BTC would reach resistance at the falling blue trendline. If we produce a big failure here, I expect the market to fall back down toward 3000.
Volume has been contracting on the chart, which is perfectly in line with the normal development of a head and shoulders pattern. Volume contracts as the pattern progresses, and then spikes on a successful breakout or a powerful failure. That's what we're looking for, one way or the other, to know the forward direction of the market.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-
Comment:
Comment:
Here is the takeaway from May's analysis. I said "As you can see, BTC is building a bull flag inside of the right shoulder, just below the neckline of the inverse. So, that's a pretty bullish looking setup. With that said, nothing is guaranteed in this game. Yes, it's an inverse head and shoulders , but that doesn't mean that we will see a breakout. Patterns fail to breakout all the time, so (for educational purposes) the best way to trade the various TA formations, is generally to wait for a confirmed breakout. In this case, that confirmation could come in the form of a sustained, high volume breakout, or a breakout followed by a reversal that holds the neckline as new support. Regardless, the bull flag inside of the right shoulder, just below the neckline, coupled with the fact that LTC has already broken out of it's inverse head and shoulders pattern, suggests that there is a high technical probability of an upside breakout of the inverse."