BTC: Diamond Pattern: Possible Drop Soon - How To Trade!

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
Here we dissect a very debatable and uncommon technical pattern: the Diamond Pattern. The Diamond Pattern is essentially what it means, a diamond shaped pattern that is seen visually within the price action. A diamond pattern is usually created within the charts when we see an extreme high and a quick sell off due to the uncertainty between both the bulls and bears, both trying to claim territory. After the high point has been created, we usually see a brief moment of trading within the means of the support line created before the high extremity. As this pattern is not a clear technical pattern, it's still considered by many a breakout pattern in the technical analysis world, where many traders will start racking up shorts or longs to bet on the direction of the breakout.

We can see that although it is a coin flip, we can still slightly get better odds of where the price will go via the current technical standpoint in the price action. This means that we currently have more bearish evidence, and due to that bearish evidence, we can bet that the pattern will break down. Why?

1. We are trading right above the CME gap, and the gap ends at $11,000. If broken, we can easily see $10,800 as a measured move.
2. According to our previous analysis on Bitcoin ("Support Turned Resistance"), we are seeing that Bitcoin is still trading below key support, which is now considered resistance.

The breakdown of the diamond appears when the price goes through the lower right side upward sloping trend line , and this is what constitutes the 'breakout'.

To calculate the current breakout for this diamond formation, you will want to take the distance between the highest and lowest point in the actual diamond pattern and add it to the breakdown point - this can be considered the actual minimum and full target.

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