Bitcoin April again, terminal shakeout, or bear winter?
Good morning, traders. After that shakeout at the end of yesterday, price has not returned to our previous accumulation zone. The question now is are we going to drop further? At first glance, that certainly appears to be the most likely course of action, doesn't it? But there are a few things you should be watching just in case it does not materialize. If you caught last night's live stream, then you saw me look at the similarities between the point right before the April squeeze and our whole recent movement. I cannot take the credit for this as someone else mentioned it, but unfortunately I cannot find who it was, so if you know then go ahead and tag them below so others know.
The left screen is our current movement while the right screen is April's movement. I have numbered the pattern's movements and we can see that price has acted very similar, complete with shorts reaching/nearing a new ATH. While I'm not saying this will definitely happen, as I am currently neutral on movement, what I am saying is that if you aren't watching to see if this potentially plays out, then you are adding significant risk to your trade. Notice in both instances that price retraced to the 23.6% level on a sharp drop after completing an ascending wedge. That drop landed price within the previous trading range. In the April movement, price then moved up to the 61.8% level prior to the squeeze, which is what we are watching for in the current movement. Also, as mentioned, in both instances shorts were reaching toward/creating a new ATH. Shorts are currently sitting at 38,576 while the ATH right before the April short squeeze was 40,719 - just a stone's throw away. The shorts/long ratio is now sitting at 1.4888. In both cases we have parabolic increases, but for every action there is an equal and opposite reaction (short squeeze in April). That reaction is where the potential lies to move price through the descending wedge's resistance. Again, I'm not guaranteeing this will happen or even stating that it is strongly likely to do so, only that I am watching price and if it continues to mimic this pattern then I plan to trade accordingly with appropriate risk management because even if price does as it did in April, there is no guarantee that it will complete in the same way. However, if it does then we would likely see a new higher high above $8500 and that would give us a bullish trend on a multi-month scale with a higher low and a higher high. The horizontal red lines denote expeted resistance if price pushes upward, similar to what we saw in April.
Of course the other likely thing that could happen at this point is continued downward momentum. In that case, it matters to me whether or not it is hard and fast, like yesterday, or if it is more subdued. If the former, then my expectation is the completion of a terminal shakeout. As I have continued to state since June, if that happens then I am looking at $5450 and $5250 for support. I remain on the fence about a move below $5000 in such an event because the new low would be so much lower than our current low. Terminal shakeouts aren't meant to go significantly lower, in general. However, there is liquidity right below $5000 and I could see the potential for a wick down below it thereby setting off a lot of new longs that have been waiting in that area. If it is the latter, then I feel that we are more likely to continuing heading down further and experiencing a longer corrective cycle. But, as I have pointed out during the live streams, the dollar index appears ready to fall. Bitcoin has moved opposite of the dollar index in much the same way that gold has, so I give it the most weight in determining what happens with Bitcoin. My expectation is that if we see the dollar index drop then we should see Bitcoin rise. And if we see the dollar index rise, then we should see Bitcoin fall further/remain down.
The left screen is our current movement while the right screen is April's movement. I have numbered the pattern's movements and we can see that price has acted very similar, complete with shorts reaching/nearing a new ATH. While I'm not saying this will definitely happen, as I am currently neutral on movement, what I am saying is that if you aren't watching to see if this potentially plays out, then you are adding significant risk to your trade. Notice in both instances that price retraced to the 23.6% level on a sharp drop after completing an ascending wedge. That drop landed price within the previous trading range. In the April movement, price then moved up to the 61.8% level prior to the squeeze, which is what we are watching for in the current movement. Also, as mentioned, in both instances shorts were reaching toward/creating a new ATH. Shorts are currently sitting at 38,576 while the ATH right before the April short squeeze was 40,719 - just a stone's throw away. The shorts/long ratio is now sitting at 1.4888. In both cases we have parabolic increases, but for every action there is an equal and opposite reaction (short squeeze in April). That reaction is where the potential lies to move price through the descending wedge's resistance. Again, I'm not guaranteeing this will happen or even stating that it is strongly likely to do so, only that I am watching price and if it continues to mimic this pattern then I plan to trade accordingly with appropriate risk management because even if price does as it did in April, there is no guarantee that it will complete in the same way. However, if it does then we would likely see a new higher high above $8500 and that would give us a bullish trend on a multi-month scale with a higher low and a higher high. The horizontal red lines denote expeted resistance if price pushes upward, similar to what we saw in April.
Of course the other likely thing that could happen at this point is continued downward momentum. In that case, it matters to me whether or not it is hard and fast, like yesterday, or if it is more subdued. If the former, then my expectation is the completion of a terminal shakeout. As I have continued to state since June, if that happens then I am looking at $5450 and $5250 for support. I remain on the fence about a move below $5000 in such an event because the new low would be so much lower than our current low. Terminal shakeouts aren't meant to go significantly lower, in general. However, there is liquidity right below $5000 and I could see the potential for a wick down below it thereby setting off a lot of new longs that have been waiting in that area. If it is the latter, then I feel that we are more likely to continuing heading down further and experiencing a longer corrective cycle. But, as I have pointed out during the live streams, the dollar index appears ready to fall. Bitcoin has moved opposite of the dollar index in much the same way that gold has, so I give it the most weight in determining what happens with Bitcoin. My expectation is that if we see the dollar index drop then we should see Bitcoin rise. And if we see the dollar index rise, then we should see Bitcoin fall further/remain down.