Hi friends! Welcome to this update analysis on Bitcoin! Before we get into the chart, I want you all to know that this analysis involves a projection of a pattern that doesn't fully exist. So, have an open mind. This is meant to be a fun and exploratory analysis, as we assess a possibilities for how this price action could develop. You may have heard me say recently, that an inverted head and shoulders pattern could be developing. Today, we're going to take a look at how that could happen, and where we may be in it's progression. So, without further ado, let's get right to it!
Looking at the daily chart, we can see that BTC closed yesterday's candle above the downtrend channel (in pink.) Today, we appear to be testing the top of the downtrend channel for support. You can see that we were below it, at one point today, but we are now right on top of the pink downtrend channel. If BTC can close above the top of that downtrend channel, and confirm it as new support, that would be a short term buy signal, indicating that a test of the 50 EMA (in orange) is imminent.
Now, here is where we can play with some exploratory price projections. Assuming that price holds the top of the downtrend channel, and then rallies to the 50 EMA (green arrow,) we can predict that the 50 EMA could act as initial resistance. That would actually be very likely, since the 50 EMA has been so resistive in the recent past. You can see it on the top left of the chart, but even more when you zoom out. So, the 50 EMA is likely to act as initial resistance. Therefore, we can assume that price would then fall back toward the top of the downtrend channel (red arrow.) From there, support could be found, again, on the top of the downtrend channel, causing price to rally back toward the 50 EMA and the neckline (green arrow.) Such a move would complete the right inverted shoulder.
Since the 50 EMA is converging with the area where a neckline could be produced, a breakout would likley take both of them out simultaneously. Such a move would be a powerful short-term bullsih indicator, and price could experience a significant rally higher.
If you recall from my past analysis, I said "If we see price rally above the 50 and hold it as support, I think there would be an extremely high chance that we will rally back into the "Major Overhead Resistance Zone," to actually test the 5775-6000 area, and potentially confirm it as resistance." Interestingly, if we DO create an inverted head and shoulders here, we can already see what the height of the head is likely to be (left black vertical dashed trendline.) Interestingly, the height of that proposed pattern, added to the neckline, projects a rally potential almost exactly into the Major Overhead Resistance Zone. So, the size of this potential inverted head and shoulders pattern is a perfect size to produce a rally to the exact level.
With that said, I realize that such forward projections are risky and potentially misleading. However, this is is an educated and informed look, at what we may be setting up for. For the record, it's best to always trade patterns when they are clearly developed. This is not yet a clearly developed inverted head and shoulders pattern, so I wouldn't put much credibility into it, until the pattern develops further.
Regardless, we may be setting up for a test of the 5775-6000 level. Does that mean the bear market is finished? Not at all. It could be, but I highly doubt it. But we don't have even a sliver of PROOF yet. Proof would consist of the market rallying above the 6000 level, holding it, and then starting to print higher highs and higher lows on the chart. Until then, there is no sense in trying to declare the bottom. We rode the wave down from 6000 perfectly, and (so far) we've ridden the wave up from the exact bottom of this recent low. So, who care's if it's a potential bottom? It's still tradeable, bottom or not. My bias is that this is a bear market rally. We haven't even seen a single higher high, and people are already declaring that the bottom is in. That, is pure ignorance. Hands down. The market is literally still in a technical downtrend, with lower highs and lower lows. The market will SHOW us when the bottom is in. Remember, never try to catch a falling knife. This market could easily rally to 6000, fail to get above it, and fall well below 3000.
So, for now, our focus is on the top of this downtrend channel, and whether or not price can hold it as support. If we break back down into the channel, and begin to head lower, then the whole inverted head and shoulders idea goes out the window, as price would then be likely to trade to a lower low.
Happy Holidays Everyone!
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-
Looking at the daily chart, we can see that BTC closed yesterday's candle above the downtrend channel (in pink.) Today, we appear to be testing the top of the downtrend channel for support. You can see that we were below it, at one point today, but we are now right on top of the pink downtrend channel. If BTC can close above the top of that downtrend channel, and confirm it as new support, that would be a short term buy signal, indicating that a test of the 50 EMA (in orange) is imminent.
Now, here is where we can play with some exploratory price projections. Assuming that price holds the top of the downtrend channel, and then rallies to the 50 EMA (green arrow,) we can predict that the 50 EMA could act as initial resistance. That would actually be very likely, since the 50 EMA has been so resistive in the recent past. You can see it on the top left of the chart, but even more when you zoom out. So, the 50 EMA is likely to act as initial resistance. Therefore, we can assume that price would then fall back toward the top of the downtrend channel (red arrow.) From there, support could be found, again, on the top of the downtrend channel, causing price to rally back toward the 50 EMA and the neckline (green arrow.) Such a move would complete the right inverted shoulder.
Since the 50 EMA is converging with the area where a neckline could be produced, a breakout would likley take both of them out simultaneously. Such a move would be a powerful short-term bullsih indicator, and price could experience a significant rally higher.
If you recall from my past analysis, I said "If we see price rally above the 50 and hold it as support, I think there would be an extremely high chance that we will rally back into the "Major Overhead Resistance Zone," to actually test the 5775-6000 area, and potentially confirm it as resistance." Interestingly, if we DO create an inverted head and shoulders here, we can already see what the height of the head is likely to be (left black vertical dashed trendline.) Interestingly, the height of that proposed pattern, added to the neckline, projects a rally potential almost exactly into the Major Overhead Resistance Zone. So, the size of this potential inverted head and shoulders pattern is a perfect size to produce a rally to the exact level.
With that said, I realize that such forward projections are risky and potentially misleading. However, this is is an educated and informed look, at what we may be setting up for. For the record, it's best to always trade patterns when they are clearly developed. This is not yet a clearly developed inverted head and shoulders pattern, so I wouldn't put much credibility into it, until the pattern develops further.
Regardless, we may be setting up for a test of the 5775-6000 level. Does that mean the bear market is finished? Not at all. It could be, but I highly doubt it. But we don't have even a sliver of PROOF yet. Proof would consist of the market rallying above the 6000 level, holding it, and then starting to print higher highs and higher lows on the chart. Until then, there is no sense in trying to declare the bottom. We rode the wave down from 6000 perfectly, and (so far) we've ridden the wave up from the exact bottom of this recent low. So, who care's if it's a potential bottom? It's still tradeable, bottom or not. My bias is that this is a bear market rally. We haven't even seen a single higher high, and people are already declaring that the bottom is in. That, is pure ignorance. Hands down. The market is literally still in a technical downtrend, with lower highs and lower lows. The market will SHOW us when the bottom is in. Remember, never try to catch a falling knife. This market could easily rally to 6000, fail to get above it, and fall well below 3000.
So, for now, our focus is on the top of this downtrend channel, and whether or not price can hold it as support. If we break back down into the channel, and begin to head lower, then the whole inverted head and shoulders idea goes out the window, as price would then be likely to trade to a lower low.
Happy Holidays Everyone!
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-