BITSTAMP:BTCUSD coming off the ETF hype and the run for the new All Time High has FAILED the breakout on the Weekly chart. Buyers did not have the momentum to give a solid close of the candle above the past ATH. Patient traders were resisting the FOMO and watching for the Weekly candle to close. This is a dangerous sign for long positions and an opening technical setup for a short position.
What the false breakout candle does is create a well defined level at 68000 for trading:
For traders that are unshakably bullish the new breakout level would be a signal to go higher
For traders that follow price action it defines the risk for a short trade
Not once, not twice, not thrice, but four times in Bitcoin's history a major bull run has had a drawdown of -80% or more. It is not only well within the probability of this happening at some point but to be expected. Whether this happens from 67k down to 13k or 250k down to 200k it is the historical nature of Bitcoin. A retracement such as this could take 1-2 years and be marked by periods of high volatility. If you do not recognize this "you don't understand Bitcoin."
On the short side if risk is defined by the breakout level a trade down to the May 2021 consolidation levels presents an attractive 6-to-1 Reward/Risk. Targets could also be set for a -80% retracement for an even greater Reward/Risk. These would be "set and forget" position trades for the long term. Another way to play the False Breakout signal is to take on a bearish bias by looking for short setups on lower timeframes (I prefer this method) until price breaks the defined risk level above the latest ATH.
Anything can happen in trading so I have laid out both the bullish and bearish paths based on this signal. Do not ignore this price action no matter what your sentiment as it provides a rare, clear indication of where price wants to go.
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My favorite meme of the moment, so true...
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For example right now on TSLA. This is what you want to see on a break of an ATH: a solid, confirmed candle close. Then you can get a real breakout rip...
I hope it happens but, to be honest, exchanges manipulated the market so much that I wouldn't be surprised to see any galactic number for this ponzi. like what Binance did by new restrictions that forced people to withdraw their bitcoins from the exchange. and then that massive short squeeze happened in august.
I agree that this is not the strongest break on the weekly but if we step back to the monthly we are still incredibly strong with similar % increase to the 20k break. Markets tend to hurt the most amount of traders and people are shaky from the last fake out.... anything can happen but for the short time I am still on the side of the bulls.
cblakew
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There has been a mid-bull-run dump to the 1.618 fib level in 2013, 2017 and now 2021.... The first two had a parabolic move + blow off top soon after. I wasn't there for all of them (sadly), but I'm going to assume people that "understand Bitcoin" thought the top was in each of those times. It comes down to big picture BTC cycle awareness.
Bitcoin is in a parallel channel connecting the 2013 & 2017 peaks. The bottom of the channel connects with the lows in 2017 and 2021 cycle - and we are nowhere near the top of the parallel channel yet.
So...considering: 1. We just had the mid cycle pull back to the 1.618 fib 2. We are still a long way from the top of the cycle channel without a parabolic move + blow off top... 3. The last 2 times this happened were followed by a parabolic spike + blow off top shortly after...
What makes us think this time will be different and it Bitcoin will die off now? Not to mention the bear market has never gone below the previous cycle's ATH... that would also be an alarming new trend that is unlikely given the history and the multi-cycle parallel channel. Anyone saying sub-20k Bitcoin is realistic has not studied the chart enough. It would take a seriously impactful outside force for that to happen.
Taking a short position for a day/swing trade during the bull run? Sure, whatever floats your boat... for pros it can definitely work. But be careful... it's risky for most people...
norok
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@cblakew, I like your historic analysis. You're correct that across the decadal cycle HODLing has been the way to go.
The objective here is to point out a technique of price action analysis that can be used not only in Bitcoin but across all instruments. I'll be making a video soon with more examples.
UnbearableLightness
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@cblakew, you seriously expect the 10 year bullish log trend to go on forever?
@Ro.goudreau i was thinking the same thing, big run soon to make the head, pull back and right shoulder, then the winter and that correlates with time of year etc