Three Formations Point To More Downside For Bitcoin! (BTC)
Hi friends! Welcome to this update analysis on Bitcoin! Looking at the daily chart, we can see that BTC remains under pressure, after the January 8th rejection at the 50 EMA (in orange.) The 50 EMA has been extremely resistive throughout the bear market, and the recent failure to rally above it has shown traders that the 50 is still a ceiling for the market. Since that failure at the 50, price fell into a bear flag consolidation (in black.) Yesterday, we actually broke down from that bear flag. Further adding to the case of more downside, this price action is also completing the right shoulder of a head and shoulders pattern (in red.)
If you recall from the BTC analyses of late 2018 and early 2019, we were following the development of an inverted head and shoulders pattern. That pattern did complete itself, but it failed to produce a breakout. However, we can see that what was the right shoulder of that pattern, has now developed into a combination of the left shoulder and the head of this new head and shoulders pattern. This is an example of pattern morphing or a pattern repetition. We can see a good example of pattern repetitions in the price action around 6000. You can see that there was a large head and shoulders pattern (on the upper left side of the chart) that also failed to produce an immediate breakdown. Instead, we saw the development of a second head and shoulders pattern before the actual breakdown took place.
Adding to the bearish case for Bitcoin, we can see that BTC continues to produce lower highs and lower lows, with no technical signs of relief. We are still very much in a bear market downtrend. Therefore, we can expect that sometime in the near future, we may see another lower low.
With that said, there is also the potential that the market may have bottomed already. The only thing that makes me believe that, is the little pink moving average on the chart. That is the weekly 200 MA, which is where the last bear market bottomed. The fact that BTC is currently holding the weekly 200 MA, leads me to believe that we may have bottomed already, but I need to see more holds of it to be sure. Admittedly, BTC did break down below the 200 MA in 2015, but it never closed a weekly candle below it. In other words, if we can continue to hold the 200 MA on a weekly basis, I think there is a decent chance that we are bottoming here.
So, to be clear, I am absolutely expecting another test of the weekly 200 MA, which is currently around the 3275 level. I would excuse a break below the 200 as long as we don't see a weekly candle close below it. If we do see a weekly close below the 200 MA, then we may see a much deeper fall. Specifically, if we fall below the 200 MA, I expect to see a test of the bottom of the downtrend channel (in black.) That would put BTC somewhere around the low 2000's. I'm not necessarily expecting that right now, because I want to see if we can hold the weekly 200 MA again before I assume further downside. Regardless, we have three identifiable formations on the chart, that project a potential fall below the weekly 200 MA. You can see that there is a dotted blue vertical trendline, which projects a fall to the bottom of the channel. That is a measurement of the symmetrical triangle that we just broke down from, subtracted from the breakdown point. Secondly, there is a vertical red dashed trendline, which also projects a breakdown below the 200 MA. Third, is the projection of the bear flag, which also shows us that price could potentially fall below the 200 MA.
In summary, there are several bearish formations on the chart, failures to create a higher high, a breakdown in buy side momentum, a failure at key 50 EMA resistance, and a bearish crossover on the daily MACD, which occurred on Jan 10th. Given these current indications, I am in "sell the rallies" mode. Right now, everyone is hunting for the bottom. Until such a bottom becomes clear, I will be protecting my investments.
Be smart. Be nimble. Good luck trading everyone!
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-
If you recall from the BTC analyses of late 2018 and early 2019, we were following the development of an inverted head and shoulders pattern. That pattern did complete itself, but it failed to produce a breakout. However, we can see that what was the right shoulder of that pattern, has now developed into a combination of the left shoulder and the head of this new head and shoulders pattern. This is an example of pattern morphing or a pattern repetition. We can see a good example of pattern repetitions in the price action around 6000. You can see that there was a large head and shoulders pattern (on the upper left side of the chart) that also failed to produce an immediate breakdown. Instead, we saw the development of a second head and shoulders pattern before the actual breakdown took place.
Adding to the bearish case for Bitcoin, we can see that BTC continues to produce lower highs and lower lows, with no technical signs of relief. We are still very much in a bear market downtrend. Therefore, we can expect that sometime in the near future, we may see another lower low.
With that said, there is also the potential that the market may have bottomed already. The only thing that makes me believe that, is the little pink moving average on the chart. That is the weekly 200 MA, which is where the last bear market bottomed. The fact that BTC is currently holding the weekly 200 MA, leads me to believe that we may have bottomed already, but I need to see more holds of it to be sure. Admittedly, BTC did break down below the 200 MA in 2015, but it never closed a weekly candle below it. In other words, if we can continue to hold the 200 MA on a weekly basis, I think there is a decent chance that we are bottoming here.
So, to be clear, I am absolutely expecting another test of the weekly 200 MA, which is currently around the 3275 level. I would excuse a break below the 200 as long as we don't see a weekly candle close below it. If we do see a weekly close below the 200 MA, then we may see a much deeper fall. Specifically, if we fall below the 200 MA, I expect to see a test of the bottom of the downtrend channel (in black.) That would put BTC somewhere around the low 2000's. I'm not necessarily expecting that right now, because I want to see if we can hold the weekly 200 MA again before I assume further downside. Regardless, we have three identifiable formations on the chart, that project a potential fall below the weekly 200 MA. You can see that there is a dotted blue vertical trendline, which projects a fall to the bottom of the channel. That is a measurement of the symmetrical triangle that we just broke down from, subtracted from the breakdown point. Secondly, there is a vertical red dashed trendline, which also projects a breakdown below the 200 MA. Third, is the projection of the bear flag, which also shows us that price could potentially fall below the 200 MA.
In summary, there are several bearish formations on the chart, failures to create a higher high, a breakdown in buy side momentum, a failure at key 50 EMA resistance, and a bearish crossover on the daily MACD, which occurred on Jan 10th. Given these current indications, I am in "sell the rallies" mode. Right now, everyone is hunting for the bottom. Until such a bottom becomes clear, I will be protecting my investments.
Be smart. Be nimble. Good luck trading everyone!
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-