Bitcoin - Descending Triangle or Adam and Eve Reversal...
Good evening traders!
If you followed my last analysis you would have avoided the previous drop and prepped yourself for this massive upside move (see red arrow ;) to $3800.
Now that we've broken out of our falling wedge, where are we headed?
It's important to understand that the falling wedge is a micro structure within a larger macro structure that you see here.
The question that we have to ask now is, are we forming a descending triangle (which is usually a bearish continuation pattern) or a potential adam and even (which is usually a bullish reversal pattern)
Like I mentioned in my previous analysis, we did have a 3 day TD9 candle that typically yields great returns and so far we are up 10% with it.
Let's analyze the macro (higher time frames) and then we'll dig into the micro (smaller time frames).
Also on the monthly you can see that the Stochastic indicator has actually started to bottom out (which is a good sign for a potential bottom soon.)
The monthly volume however, suggests that we are still firmly in a bear market and this is just a small retrace from last months drop.
NOTE: The Stochastic can stay bottomed out for a while, so don't get too overexcited.
This may be the first positive month for Bitcoin in 7 months if February can close above $3500 on Finex
If not, it'll look a lot like Dec and Jan where it pumped hard and closed below
We saw a perfect run to the 50% fib level on the weekly chart after a nice bounce off the 78.6%, so this could be a higher time frame dead cat bounce (aka relief rally) before more downside momentum.
Although daily volume and 4 hour volume were massive, the weekly volume is still dead and is pointing to continued downside movement on the macro trend.
Looking at pure price action alone, we can definitely see that the daily is showing signs of live with this breakout move.
The red will be strong resistance though as we've got confluence with the 50MA, previous monthly closing as well as a strong fibonacci level.
Now, on the chart I've laid out for you, we can clearly see on the daily chart that we do not hold the top of the bollinger band for very long, so based on both the previous bollinger band and the previous price action, I think we'll see a bit of a pull back here and potentially form a bull flag before a continued move up where we retest the downward sloping resistance level.
Here's the ultimate question though...
is this a bearish continuation pattern
or an Adam and Eve reversal
CONFIRMATION:
The only way we'll know that is with price action confirmation. If price runs to the $3811 and gets rejected then we know that this triangle formation is valid and we'll need to prepare for continued downside momentum as these patterns usually continue in the prevailing trend.
If, however, price can move through the downtrend resistance to the $4150 level and consolidate, then we'll know that our adam and even reversal pattern may be valid for a breakout to the upside and retest of higher time frame resistances.
In the short term, here is what I could see:
I could see a pull back to the 20MA (midline of the bollinger band) before retesting the top of the triangle and attempting to break out.
Just off of price action, we could see this as well
BITMEX TRADER'S NOTE AND CAUTION:
Please make sure that if you are trading on Bitmex, you look at the XBTUSD chart as Bitfinex values are different than Bitmex.
Thanks for reading!
I really hope you've enjoyed my analysis and it would be an honor if you could give me a follow and a like on this chart and a comment below.
Please let me know your thoughts! The more feedback, the better as I like to see what you guys are coming up with as well.
If you followed my last analysis you would have avoided the previous drop and prepped yourself for this massive upside move (see red arrow ;) to $3800.
Now that we've broken out of our falling wedge, where are we headed?
It's important to understand that the falling wedge is a micro structure within a larger macro structure that you see here.
The question that we have to ask now is, are we forming a descending triangle (which is usually a bearish continuation pattern) or a potential adam and even (which is usually a bullish reversal pattern)
Like I mentioned in my previous analysis, we did have a 3 day TD9 candle that typically yields great returns and so far we are up 10% with it.
Let's analyze the macro (higher time frames) and then we'll dig into the micro (smaller time frames).
Also on the monthly you can see that the Stochastic indicator has actually started to bottom out (which is a good sign for a potential bottom soon.)
The monthly volume however, suggests that we are still firmly in a bear market and this is just a small retrace from last months drop.
NOTE: The Stochastic can stay bottomed out for a while, so don't get too overexcited.
This may be the first positive month for Bitcoin in 7 months if February can close above $3500 on Finex
If not, it'll look a lot like Dec and Jan where it pumped hard and closed below
We saw a perfect run to the 50% fib level on the weekly chart after a nice bounce off the 78.6%, so this could be a higher time frame dead cat bounce (aka relief rally) before more downside momentum.
Although daily volume and 4 hour volume were massive, the weekly volume is still dead and is pointing to continued downside movement on the macro trend.
Looking at pure price action alone, we can definitely see that the daily is showing signs of live with this breakout move.
The red will be strong resistance though as we've got confluence with the 50MA, previous monthly closing as well as a strong fibonacci level.
Now, on the chart I've laid out for you, we can clearly see on the daily chart that we do not hold the top of the bollinger band for very long, so based on both the previous bollinger band and the previous price action, I think we'll see a bit of a pull back here and potentially form a bull flag before a continued move up where we retest the downward sloping resistance level.
Here's the ultimate question though...
is this a bearish continuation pattern
or an Adam and Eve reversal
CONFIRMATION:
The only way we'll know that is with price action confirmation. If price runs to the $3811 and gets rejected then we know that this triangle formation is valid and we'll need to prepare for continued downside momentum as these patterns usually continue in the prevailing trend.
If, however, price can move through the downtrend resistance to the $4150 level and consolidate, then we'll know that our adam and even reversal pattern may be valid for a breakout to the upside and retest of higher time frame resistances.
In the short term, here is what I could see:
I could see a pull back to the 20MA (midline of the bollinger band) before retesting the top of the triangle and attempting to break out.
Just off of price action, we could see this as well
BITMEX TRADER'S NOTE AND CAUTION:
Please make sure that if you are trading on Bitmex, you look at the XBTUSD chart as Bitfinex values are different than Bitmex.
Thanks for reading!
I really hope you've enjoyed my analysis and it would be an honor if you could give me a follow and a like on this chart and a comment below.
Please let me know your thoughts! The more feedback, the better as I like to see what you guys are coming up with as well.
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