OrcChieftain

Drawing an analogy to drop in May

Long
COINBASE:BTCUSD   Bitcoin / U.S. Dollar
Price movement is in many ways similar to what we could see in May this year. First, it is what had preceded the movement since January. Second, it is its nature itself, particularly the high volatility candle which is in motion Today.

Reading from the left:
→ A price stops its impulsive rally to consolidate its way back towards 50 EMA (red).
→ Another impulsive rally starts, breaking the all-time-high of its time and reaching up to 60k levels. The price starts to consolidate up there.
→ The large fearmongering drop surely blasted through stop-losses, particularly those belonging to high-leverage traders. The most significant candle which paints both support and resistance for almost 3 months accounts for a 30% drop (high -> low) but only 15% total price movement after it closes (open -> close). Also, see the spiking volume.

Now, we are in the middle of the chart:
→ The price starts another rally covering the whole range and blasting through resistance (almost) at ease.
→ Growth stops and the price slowly retraces back towards 200 EMA (black)/
→ Dynamic moving-average-based support gives the price strength to resume its rally reaching for an all-time high. I believe, I predicted this level since I have always had the yellow rectangle in this area.
→ The price consolidates up there.
→ The large fearmongering drop surely blasted through stop-losses, particularly those belonging to high-leverage traders. The candle isn't closed, so we will have to wait to see how much open-> close accounts for from a total of high -> low which is a 21.5% drop and may still change.

I believe there is a considerable chance that the previous development will repeat and that there will be another way up. But I don't think it will create another all-time high. There is just not enough time for that, nor enough risk appetite. Even from a technical perspective, the first time this pattern occurred, the key dynamic support turned out to be 50 EMA . The second time, it bounced off a traditional 200 EMA daily and the overall gain on top of the all-time high was mitigated accordingly. This time, we are talking about 400 EMA as dynamic support which I normally don't even put on the chart.

In defense of bitcoin , December is usually a fairly good month as it is for the correlating markets such as stocks. But it is still a fairly speculative asset and I think, the investors will search rather defensive portfolios with many expecting a crash in Q1 2022.

If the consolidation follows a similar pattern as it did in May, we may see a good buying opportunity at the mid-December earliest. I want to see the markets calm down and reach for the low of this high-volatility candle. Then, I would consider going long towards the high of this named candle.

Good luck!
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