After BTC's big flush on May 19th it found support, just below 40K, off the double-bottom of Jan 21st and Jan 22nd. That left me wondering if a 'Head and Shoulders' pattern would form on the daily. On May 23rd I drew an ascending support line (purple) all the way up to the 42K mark - matching the left shoulder high of Jan 8th. Indeed, this ascending line, which mirrors a descending line I drew off the left shoulder, has repeatedly acted as support or resistance over the past three weeks. In fact, the price action had hung around this line (as resistance) for the past 16hrs before finally breaking through within this past hour.
I propose that we will see very strong resistance at 42K during the formation of the right shoulder. If there is a break through 42K it will be explosive, with stacked buy orders up in the 42500 area. But with that said, I would like to see a pullback and a test of support at 42k before I would trust a major move back to 60k. If this 42k breakout is rejected I will personally flatten all of my crypto positions for a few days as I think BTC will be in free-fall back to 30K, and possibly beyond.
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Price action has persisted along the purple (ascending) and yellow (descending) trend lines that I drew on May 23rd, confirming the formation of a head and shoulders pattern on the daily. My entry at 31200 came very close to stopping out on June 8th but found support before the move up to what I was calling the "moment of truth" right shoulder at 42K (and the whole 420 reference thing). I watched the break of 41K for a move towards 42K and was actually surprised to see the selling volume spike there, and a total lack of support at 41K, causing a false breakout and flush. At that point I flattened all crypto positions as stated above, but I still expected a retest of 41 and a move towards 42. That did not happen and the downward trend has eerily mirrored uptrend of Jan 1st-8th. We are now approaching critical support levels at the neckline around 29K. Failing levels at 31 and 30 will put it deep it deep in the danger zone and a failure at 29K will put it in freefall until possible resistance at 24k and 20k.
I am not a bearish trader - I am bullish, but in my non-expert opinion this is an undeniable pattern and I am clearly not the only one seeing it. Many retail trader apps make it difficult to see the bigger picture view with small screens and weird timeframes. Coinbase for example defaults to 15M and doesn't even offer any drawing tools. These traders are buying on hope when the small retracements to the upside while the "whales" are watching with a broader view, and are clearing watching this pattern form as the price action reacts totally predictably each time it reaches support and resistance levels that perpetuate this H&S narrative on the daily.
Here is a 6mth snapshot of the daily, one month hourly to follow:
tradingview.com/x/aeJsJstz/
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1 mth hourly: tradingview.com/x/ntQW6vMR/
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Here is the hourly over the past week: tradingview.com/x/pQZnvzM8/
As you can tell, I've drawn far fetched trend lines at every move, searching for some kind of support or breakout opportunity. Yesterday June 20th showed the only promising moment with a small break of the thicker green descending trend line to the right, but it was not to be...
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There goes the Neckline!!!
Here are the past couple days on the hourly: tradingview.com/x/OTUtj5iD/
Here is the past month on the daily: tradingview.com/x/XYnqV9k2/
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Today BTCUSD saw a remarkable bounce off the Daily H&S neckline, and as it is about the test support on a key line of resistance that it just crossed, I am about ready to consider this bearish Head and Shoulders pattern broken or at least completed for a bounce to the upside.
There was a double bottom on the 5 minute at 29650 which was almost to the penny along the slightly ascending neckline that I'd drawn on May 23rd. Below that I had drawn a simple horizontal ray at 29250 from the same left neckline origin, just in case I was wrong about the ascending neckline or if many traders had simply interpreted the pattern this way. Indeed, it broke support and formed a double bottom (5min) off 29250 which in turn became a double bottom on the hourly, triggering that lovely move up through 32K. The beauty of considering this latter support level as a last vestige of home was that it did not require buy-in for the H&S thesis: it was also simply a very obvious support level off a clear pivot on the daily. Therefore the buyer support at that level was amplified.
Now we have seen a break through a significant line of descending resistance and a retest as support on the 5 minute. I feel optimistic about putting this pattern behind us and am already trading accordingly.
I apologize for the awkward links, I'm not yet "hereby certified" to post direct links, but here are some images regarding the above:
Was thinking about is as well, but the middle is too wide to count this as HnS imo
FishMunga
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@Domyx, Yes, it is a very broad top. It started looking a little more convincing on the weekly timeframe, tho it still doesn't have a very distinct apex. Perhaps a 2 week view would look better, but few others would see it that way. But regardless of whether it plays out this way or not, I get the feeling that most traders' in the crypto market (more than in typical stock markets) are looking at patterns in a very short term view - I'm seeing a lot of optimism (or hope) that it is now going to rebound to the highs. This could be because many of the apps like Coinbase and Binance, particularly on phones, make it quite difficult to pull back for a longer term view with hourly or even daily candles. That causes me to wonder is institutional and/or serious traders with good analysis tools are trading according broader view patterns which smaller retail traders are kind of "living in the moment" and simply amplifying the movements caused by bigger traders / positions. A good head scratcher and I'm enjoying watching how this past few weeks plays out!
Domyx
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@FishMunga, Normal people don't cause the price changes, it's the whales who hold most of btc and feed of the average Joes.
FishMunga
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@Domyx yeah I hear you. I actually have news items and particular tweets marked on my chart at the moment they post and it’s crazy how well they correlate with volume and price action. I left them off this chart for fear of being seen as a conspiracy theorist, but let’s just say that if I were about to buy eight or nine figures in a stock I would probably also have my PR team start hyping it first so that I could buy into momentum. Unfortunately I don’t see me swinging those numbers anytime soon, but I’ll let you know if that changes :-)
Domyx
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@FishMunga, for sure when big boys tweet there is action followed. There are even people who put auto buy bots when Elon tweets.
Bucholta
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heads' and shoulders?
FishMunga
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@Bucholta, If it plays out it would be a multi-headed monster :-/