In this analysis I'd like to dive into the macro price action of Bitcoin this year and what we can expect till the end of February. To understand what happened and what could happen we'll look at data from futures , options and the trend we has since the ATH in November.
From 69K to 33K
First lets look at the price action of Bitcoin from 69 to 33K , some might say its an healthy correction. Healthy indeed given the open interest and hype in November but it was indeed an impulse down counting 5 waves across 4 different price levels:
Level 0: 55-70K - macro overextension
Level 1: 46-55K - weekly overextension
Level 2: 41-46K - weekly mean
Level 3: 33-44K - macro mean
And possibly for later this year:
Level 4: 25-33K - weekly overextension
Level 5: 19-25K - macro overextension
Futures expiration 25th of February
This means we have completed our first impulse wave down and currently have found support at the macro (read: yearly) mean. This zone is of specific interest as it resides the max pain price of the 25th of February expiration which holds notable open interest. This means market makers are likely to bring Bitcoin towards this price range by the end of the month.
Correction wave & price channel
As the impulse down was overextended on a daily and weekly time frame we are now in either a ABC correction upwards or a lengthier impulse upwards. Currently, Bitcoin is range bound in the price channel and we will loose upward momentum when we break its support and retest it as resistance. This could induce the following price action till the end of February; a last tap of the 800 EMA (white) and a controlled move down towards the max pain price. Another scenario could see us tapping the bull market support band this month, creating a more volatile spike up and spike down.
Bitcoin levels
What price action is currently indicating is that we are forming a potential peak formation around the 46K , this would indicate low volatility till the end of February. On the right side you can see we have been rejected twice at R2 which lead us to test R1 and the pivot point around 40 / 41K .
Mass liquidity is found between S1 and S3 zone which inhibit the highest volume of long liquidations. A loss of this zone bring us to strong support at S4 at 35K which coincides with the 2200 EMA and the demand zone . A potential break of this level in the future would lead us to level 4 and potentially 5.
Be aware that currently directional trades aren't your best bet because we are right back in the chop zone we were in during January. Scalps are to be found especially if you trail stops in profit but represent increased risk during a chop. For a daily and weekly view we need to keep our eyes on the market maker's liquidity zones, together with the support and resistance extensions. In this range the 800 EMA represents true resistance and 2200 EMA the true support. (for now!)
Potential bullish outlook
For a mid term bullish outlook I want to see Bitcoin forming a mid term bottom and the second leg of the W formation in the demand zone together with a clean break of 37K in confluence with moderate levels of open interest.
Potential bearish outlook
The most likely scenario mid term is still bearish . With a hawkish fed and a hike in March, high risk assets like crypto are unfavourable (at least in the short / mid term). What I would like to see is a clean impulse down for indexes across the world, a deleveraging event for stocks and crypto and a capitulation. If that happens, you''d get a big fat LONG signal. For now though, there's still a way to go...
Conclusion
For the day traders, today's New York session will tell a lot of the short term direction of the market. The trade I posted on Monday is still in play. For swing traders its time to sit on your hands and wait till the end of February and a potential retest of the bull market support band (as resistance)or the demand zone (as support). For long term investors it's an endurance waiting game to wait for capitulation at level 4 or 5.
Good luck!
IMPORTANT: this is not financial advice, trade or invest based on your own risk and research.
From 69K to 33K
First lets look at the price action of Bitcoin from 69 to 33K , some might say its an healthy correction. Healthy indeed given the open interest and hype in November but it was indeed an impulse down counting 5 waves across 4 different price levels:
Level 0: 55-70K - macro overextension
Level 1: 46-55K - weekly overextension
Level 2: 41-46K - weekly mean
Level 3: 33-44K - macro mean
And possibly for later this year:
Level 4: 25-33K - weekly overextension
Level 5: 19-25K - macro overextension
Futures expiration 25th of February
This means we have completed our first impulse wave down and currently have found support at the macro (read: yearly) mean. This zone is of specific interest as it resides the max pain price of the 25th of February expiration which holds notable open interest. This means market makers are likely to bring Bitcoin towards this price range by the end of the month.
Correction wave & price channel
As the impulse down was overextended on a daily and weekly time frame we are now in either a ABC correction upwards or a lengthier impulse upwards. Currently, Bitcoin is range bound in the price channel and we will loose upward momentum when we break its support and retest it as resistance. This could induce the following price action till the end of February; a last tap of the 800 EMA (white) and a controlled move down towards the max pain price. Another scenario could see us tapping the bull market support band this month, creating a more volatile spike up and spike down.
Bitcoin levels
What price action is currently indicating is that we are forming a potential peak formation around the 46K , this would indicate low volatility till the end of February. On the right side you can see we have been rejected twice at R2 which lead us to test R1 and the pivot point around 40 / 41K .
Mass liquidity is found between S1 and S3 zone which inhibit the highest volume of long liquidations. A loss of this zone bring us to strong support at S4 at 35K which coincides with the 2200 EMA and the demand zone . A potential break of this level in the future would lead us to level 4 and potentially 5.
Be aware that currently directional trades aren't your best bet because we are right back in the chop zone we were in during January. Scalps are to be found especially if you trail stops in profit but represent increased risk during a chop. For a daily and weekly view we need to keep our eyes on the market maker's liquidity zones, together with the support and resistance extensions. In this range the 800 EMA represents true resistance and 2200 EMA the true support. (for now!)
Potential bullish outlook
For a mid term bullish outlook I want to see Bitcoin forming a mid term bottom and the second leg of the W formation in the demand zone together with a clean break of 37K in confluence with moderate levels of open interest.
Potential bearish outlook
The most likely scenario mid term is still bearish . With a hawkish fed and a hike in March, high risk assets like crypto are unfavourable (at least in the short / mid term). What I would like to see is a clean impulse down for indexes across the world, a deleveraging event for stocks and crypto and a capitulation. If that happens, you''d get a big fat LONG signal. For now though, there's still a way to go...
Conclusion
For the day traders, today's New York session will tell a lot of the short term direction of the market. The trade I posted on Monday is still in play. For swing traders its time to sit on your hands and wait till the end of February and a potential retest of the bull market support band (as resistance)or the demand zone (as support). For long term investors it's an endurance waiting game to wait for capitulation at level 4 or 5.
Good luck!
IMPORTANT: this is not financial advice, trade or invest based on your own risk and research.
Comment:
The trade I posted on Monday played out, entry was at the break of the local support in confluence with peak formation and spikes to the upside (vector candles) at R2:
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