Is bitcoin on the verge of hitting $5,000? (Bullish Scenario)
Did bitcoin bottom out? Is Bitcoin going to $1,000? Is this bear market going to end just like the last bear market?
It’s impossible to know the definitive answer to any of these questions, so why not prepare yourself for any outcome?
That is precisely the reason for this post, to present a bullish scenario that has the possibility to come to fruition if BTC price is able to scale above roughly $4,200 (will slightly differ depending on the exchange used). This analysis will be on the simpler side, looking at some patterns, indicators as well as a correlation with litecoin.
First, let’s take a look at the possible inverse head and shoulders pattern ( bullish reversal) that is forming on bitcoin’s daily time frame. If you don't know what that pattern is or looks like, see here: thepatternsite.com/hsb.html
As can be seen in the main chart above, price has formed the left shoulder and head of the pattern and now seems to be forming the right shoulder while clinging to the 100 day MA for support.
The $3,700 area is important ground for bulls to protect since it is the location of the 100 day MA as well as prior daily price resistance that needs to hold as support to avoid a stronger bearish outlook.
Since the level is now acting as support ( bullish polarity), the chance for more upside is greater, and there is not much resistance until the iH&S neckline (red dashed line) near $4,200.
That is the crucial resistance level to watch out for since a high time frame break and close above with high volume would confirm the bullish reversal pattern.
Adding to the bullish potential is the weekly MACD indicator. As reported by CoinDesk, the MACD on bitcoin's weekly time frame has completed a bullish cross (indicating bullish shift in long term momentum) with notable follow through and its highest histogram value in over a year. Similar developments occurred after BTCs price bottomed out in 2015. Read here for more info on bitcoin's current MACD: www.coindesk.com/bitcoins-macd-pr...
Let’s say price is able to scale the iH&S neckline, we can create a measured move of the iH&S breakout by adding the “head to neckline” distance to the anticipated breakout point. This creates a measured move of roughly $5,000 which also happens to be the location of the 200 day moving average.
Price could very well reject from the 200 day MA and make its way to new lows, but since that hypothetical is a ways away from happening, this analysis only focuses on how we could get to the 200 day MA, not what happens after. That will be in Part. 2 of this analysis, perhaps.
Litecoin Connection:
Another development to consider is litecoin’s LTC/USD behavior.
It's no secret that LTC has been one of the best performers as of late, up ~130% since December, but what does this tell us about bitcoin?
As can be seen in the chart above, LTC effectively ended its 2015 bear market by making significant higher highs well before bitcoin did, even though they bottomed out at the same time.
It’s been speculated LTC’s rise at that time was due to investors pricing its 1st “halving” event months in advance. The 1st halving took place on Aug. 26, 2015.
With LTC’s next halving event coming up in August 2019, and bitcoin's halving estimated to occur in May of 2020, it looks like history could be repeating itself with litecoin getting another head start on its bullish trend change before bitcoin does.
As can be seen, LTC and BTC hit their ultimate 2018 lows at the same time, but LTC has since risen to create higher highs as well as breaking is year long downtrend line while BTC has largely traded sideways - just as what happened in 2015.
Invalidation
Again, this is a bullish scenario. A bearish scenario is also a possibility, and perhaps a more likely one, given bitcoin's trend is so entrenched in bearish control. This idea is hinged on the success of bitcoin's inverse head and shoulders pattern playing out. If it's right shoulder fails to form, the outlook on BTC will need to be evaluated.
Please leave your comments and questions below, and follow us on Twitter here twitter.com/CoinDeskMarkets or join our Dojo on StockTwits here: www.stocktwits.com/r/CoinDeskDojo
It’s impossible to know the definitive answer to any of these questions, so why not prepare yourself for any outcome?
That is precisely the reason for this post, to present a bullish scenario that has the possibility to come to fruition if BTC price is able to scale above roughly $4,200 (will slightly differ depending on the exchange used). This analysis will be on the simpler side, looking at some patterns, indicators as well as a correlation with litecoin.
First, let’s take a look at the possible inverse head and shoulders pattern ( bullish reversal) that is forming on bitcoin’s daily time frame. If you don't know what that pattern is or looks like, see here: thepatternsite.com/hsb.html
As can be seen in the main chart above, price has formed the left shoulder and head of the pattern and now seems to be forming the right shoulder while clinging to the 100 day MA for support.
The $3,700 area is important ground for bulls to protect since it is the location of the 100 day MA as well as prior daily price resistance that needs to hold as support to avoid a stronger bearish outlook.
Since the level is now acting as support ( bullish polarity), the chance for more upside is greater, and there is not much resistance until the iH&S neckline (red dashed line) near $4,200.
That is the crucial resistance level to watch out for since a high time frame break and close above with high volume would confirm the bullish reversal pattern.
Adding to the bullish potential is the weekly MACD indicator. As reported by CoinDesk, the MACD on bitcoin's weekly time frame has completed a bullish cross (indicating bullish shift in long term momentum) with notable follow through and its highest histogram value in over a year. Similar developments occurred after BTCs price bottomed out in 2015. Read here for more info on bitcoin's current MACD: www.coindesk.com/bitcoins-macd-pr...
Let’s say price is able to scale the iH&S neckline, we can create a measured move of the iH&S breakout by adding the “head to neckline” distance to the anticipated breakout point. This creates a measured move of roughly $5,000 which also happens to be the location of the 200 day moving average.
Price could very well reject from the 200 day MA and make its way to new lows, but since that hypothetical is a ways away from happening, this analysis only focuses on how we could get to the 200 day MA, not what happens after. That will be in Part. 2 of this analysis, perhaps.
Litecoin Connection:
Another development to consider is litecoin’s LTC/USD behavior.
It's no secret that LTC has been one of the best performers as of late, up ~130% since December, but what does this tell us about bitcoin?
As can be seen in the chart above, LTC effectively ended its 2015 bear market by making significant higher highs well before bitcoin did, even though they bottomed out at the same time.
It’s been speculated LTC’s rise at that time was due to investors pricing its 1st “halving” event months in advance. The 1st halving took place on Aug. 26, 2015.
With LTC’s next halving event coming up in August 2019, and bitcoin's halving estimated to occur in May of 2020, it looks like history could be repeating itself with litecoin getting another head start on its bullish trend change before bitcoin does.
As can be seen, LTC and BTC hit their ultimate 2018 lows at the same time, but LTC has since risen to create higher highs as well as breaking is year long downtrend line while BTC has largely traded sideways - just as what happened in 2015.
Invalidation
Again, this is a bullish scenario. A bearish scenario is also a possibility, and perhaps a more likely one, given bitcoin's trend is so entrenched in bearish control. This idea is hinged on the success of bitcoin's inverse head and shoulders pattern playing out. If it's right shoulder fails to form, the outlook on BTC will need to be evaluated.
Please leave your comments and questions below, and follow us on Twitter here twitter.com/CoinDeskMarkets or join our Dojo on StockTwits here: www.stocktwits.com/r/CoinDeskDojo
Trade active:
The $5,000 target was hit and then some, creating roughly 40% profit potential from a 3-week swing trade.
Price is now coming in contact with the 200 day MA, so the situation will need to be re-evaluated as mentioned above.
Updates coming soon!
Price is now coming in contact with the 200 day MA, so the situation will need to be re-evaluated as mentioned above.
Updates coming soon!