Primary Chart: Fibonacci Channel and Fibonacci Retracements for June-August 2022 Rally
The bear market cannot be finished even if a bear-market rally happens tomorrow that leads BTC above its 11-month trendline. Dip buyers keep jumping in to "find the bottom."
The five stages of a bear market include denial, anger, bargaining, depression, and acceptance. Could crypto and equity markets still be in denial? Or have markets moved to the third stage of bargaining?
With all the talk of "double bottoms," in both equities and crypto, perhaps the current stage is "bargaining." Why? By framing the current selloff in this bear market as a "double bottom," market participants show that they are trying to cast the current ugly decline in a positive light. A double bottom, after all, is a pattern that implies a powerful rally after the second bottom, where the rally eventually exceeds the peak between the two bottoms and continues thereafter once confirmed. So all the banter about double bottoms shows that a lot of bullish hopes still have not been crushed. The end of a bear market, by contrast, evidences the fourth and fifth stages of bear-market grief, which is depression and acceptance (capitulation).
Given how dip buyers keep swooping in to buy at each low despite the numerous rejections at trendline resistance levels (see the Fibonacci Channel on the Primary Chart), capitulation has not yet occurred.
Price action today, September 30, 2022, came very close to the 11-month downward trendline. Price rejected before actually tagging this line. But will it break the 11-month trendline in the coming weeks? Why should this time be any different than the all the other rejections since its all-time high? No one knows for sure, but if 11 months of history is any guide, the odds favor lower prices even if a whipsaw break of the multi-month trendline occurs.
Trendlines can break, and technical experts say that a broken trendline does not automatically equate to a trend reversal. Instead, it often leads to either (1) a sideways trend, or (2) a continuation of the trend at a different angle of descent.
Many asset classes have now undercut June 2022 lows including major equity indices such as the S&P 500 (
SPX
) and the Nasdaq 100 (
QQQ
). It seems likely that BTC can fight the tide (breaking June 2022 lows) only so long. Or is something else holding the price sideways for the past two weeks? This author primary relies on technical, rather than fundamental, analysis. So any readers who wish to add a fundamental perspective in the comments (even if it runs contrary to this view) are welcome to do so.
Supplementary Chart A: Nasdaq 100 Undercut June 2022 Lows
The current consolidation can also be framed as a right-angled triangle. Right-angled triangles do not have to break in the implied direction that the sloping side of the triangle suggests. Price never has to do anything traders or technical analysts say. But right-angled triangles often do break in the direction of the sloping trendline—whether the sloping trendline is the upper edge or lower edge of the triangle. This has lead to their classification as a pattern that does imply a directional move once the consolidation completes. Right-angled descending triangles, such as the one shown in the post below, tend to break to the downside.
The triangle shown below is nearing its end, or "apex." This implies that a directional breakout should soon occur giving relief to either the bears or the bulls, or perhaps frustrating them both with a whipsaw move.
Supplementary Chart B: Right-Angled Triangle
Reasonable downside targets have been discussed thoroughly in the related BTC posts linked below.
________________________________________
Author's Comments:
(1) Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate in the comment section. Shared charts are especially helpful to support any opposing or alternative view.
(2) This technical-analysis view does not constitute a trade recommendation or trade setup. Instead, it attempts to offer technical commentary that describes and analyzes price levels, trends, price action, or the broader technical environment as of the publication date. Technical-analysis commentary does not equate to trade setups or recommendations. Within a given price environment, traders bear responsibility for their own trading strategy, risk tolerance, and time frame, and for any due diligence associated with such trades.
(3) This technical-analysis viewpoint could change at a moment's notice, e.g., when price violates a key level of invalidation for a particular view. Further, proper risk-management techniques are vital to trading success.
(4) To the extent countertrend price moves are discussed, consider that countertrend or mean-reversion trading, e.g., trading a rally in a bear market, remains higher risk and lower probability even for the most experienced traders and investors.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified / licensed financial adviser or other financial or investment professional before entering any trade, investment or other transaction.
The bear market cannot be finished even if a bear-market rally happens tomorrow that leads BTC above its 11-month trendline. Dip buyers keep jumping in to "find the bottom."
The five stages of a bear market include denial, anger, bargaining, depression, and acceptance. Could crypto and equity markets still be in denial? Or have markets moved to the third stage of bargaining?
With all the talk of "double bottoms," in both equities and crypto, perhaps the current stage is "bargaining." Why? By framing the current selloff in this bear market as a "double bottom," market participants show that they are trying to cast the current ugly decline in a positive light. A double bottom, after all, is a pattern that implies a powerful rally after the second bottom, where the rally eventually exceeds the peak between the two bottoms and continues thereafter once confirmed. So all the banter about double bottoms shows that a lot of bullish hopes still have not been crushed. The end of a bear market, by contrast, evidences the fourth and fifth stages of bear-market grief, which is depression and acceptance (capitulation).
Given how dip buyers keep swooping in to buy at each low despite the numerous rejections at trendline resistance levels (see the Fibonacci Channel on the Primary Chart), capitulation has not yet occurred.
Price action today, September 30, 2022, came very close to the 11-month downward trendline. Price rejected before actually tagging this line. But will it break the 11-month trendline in the coming weeks? Why should this time be any different than the all the other rejections since its all-time high? No one knows for sure, but if 11 months of history is any guide, the odds favor lower prices even if a whipsaw break of the multi-month trendline occurs.
Trendlines can break, and technical experts say that a broken trendline does not automatically equate to a trend reversal. Instead, it often leads to either (1) a sideways trend, or (2) a continuation of the trend at a different angle of descent.
Many asset classes have now undercut June 2022 lows including major equity indices such as the S&P 500 (
SPX
) and the Nasdaq 100 (
QQQ
). It seems likely that BTC can fight the tide (breaking June 2022 lows) only so long. Or is something else holding the price sideways for the past two weeks? This author primary relies on technical, rather than fundamental, analysis. So any readers who wish to add a fundamental perspective in the comments (even if it runs contrary to this view) are welcome to do so. Supplementary Chart A: Nasdaq 100 Undercut June 2022 Lows
The current consolidation can also be framed as a right-angled triangle. Right-angled triangles do not have to break in the implied direction that the sloping side of the triangle suggests. Price never has to do anything traders or technical analysts say. But right-angled triangles often do break in the direction of the sloping trendline—whether the sloping trendline is the upper edge or lower edge of the triangle. This has lead to their classification as a pattern that does imply a directional move once the consolidation completes. Right-angled descending triangles, such as the one shown in the post below, tend to break to the downside.
The triangle shown below is nearing its end, or "apex." This implies that a directional breakout should soon occur giving relief to either the bears or the bulls, or perhaps frustrating them both with a whipsaw move.
Supplementary Chart B: Right-Angled Triangle
Reasonable downside targets have been discussed thoroughly in the related BTC posts linked below.
________________________________________
Author's Comments:
(1) Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate in the comment section. Shared charts are especially helpful to support any opposing or alternative view.
(2) This technical-analysis view does not constitute a trade recommendation or trade setup. Instead, it attempts to offer technical commentary that describes and analyzes price levels, trends, price action, or the broader technical environment as of the publication date. Technical-analysis commentary does not equate to trade setups or recommendations. Within a given price environment, traders bear responsibility for their own trading strategy, risk tolerance, and time frame, and for any due diligence associated with such trades.
(3) This technical-analysis viewpoint could change at a moment's notice, e.g., when price violates a key level of invalidation for a particular view. Further, proper risk-management techniques are vital to trading success.
(4) To the extent countertrend price moves are discussed, consider that countertrend or mean-reversion trading, e.g., trading a rally in a bear market, remains higher risk and lower probability even for the most experienced traders and investors.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified / licensed financial adviser or other financial or investment professional before entering any trade, investment or other transaction.
Comment:
A closer view of the price action the past week, showing a lot of sideways chop and rallies right up to trendline resistance. The trendline keeps falling, though, so the resistance level keeps getting lower, and the triangle shown above keeps getting narrower.
Comment:
As posted several days ago, price continues to chop around the .786 R level discussed in several BTC posts over the past few weeks. It's chopped here for about 15 days. Here is a daily chart showing the rapidly approaching downward trendline (the 11-month trendline discussed) as well as the .786 R level at 19,246 with failed breakouts above and below since September 16.
Comment:
BTC did not get rejected at the downward TL shown on the charts above when it approached and tested them this time. Instead, it broke through the TL. This downward TL on the Fib Channel (also called the zero line) was placed on a linear (or arithmetic) chart. If the Fib Channel is placed on a log chart, price is far below this TL, an interesting consideration! Which is more reliable? Given the massive numerical price swing in BTC since the ATH until now, I would argue that the log chart shows the more suitable TL.
Here is the Fib Channel (and down TL) applied on a linear / arithmetic chart:
Here is the Fib Channel (and down TL) on a logarithmic chart:
Here is the Fib Channel (and down TL) applied on a linear / arithmetic chart:
Here is the Fib Channel (and down TL) on a logarithmic chart:
SquishTrade
Related Ideas
