Head and Shoulders to Take us Down to Key Support Level

COINBASE:BTCUSD   Bitcoin / U.S. Dollar
As per previous analysis linked below; we have been following this fractal since July 16th and it has played out as expected ever since.

Currently we are still in the descending wedge ; which is technically bullish - however looking at the slightly larger picture we are forming a head and shoulders which will take us to the bottom of our triangle pattern . We still don't yet know exactly where we will land; however it will likely be somewhere in the blue area (or just on top) based on the height of the head and shoulders pattern. From there we range for a couple days or so before finally deciding whether we are bear to the bottom or bull for the double top .

Which will it be - bear or bull? Well the fractal itself is bullish 90% of the time. We also have the descending wedge which suggests once we hit the bottom we can break out and will make our way back up to the top of the triangle again. This view gives the bullish side the edge; and would likely result in the double top scenario.

From a bearish perspective; we have the much larger diamond top reversal scenario; however given the now slightly more bullish aspect of this fractal - we can still get the double tap of the red strong resistance dotted line AND have a double top at the same time (dependant on how slow the pattern plays out).

Again; if we do fall through the bottom support of the blue triangle, it is likely we will see a retest and come back into the triangle briefly; which would be the opportunity to short for those who are not short from the top of the pattern already.

How to trade? I am still short from 11,077 and stops have been moved into profit at 10,777. As we move down; I will continue to move my stop down as well but keep it atleast $200 above the current price to avoid any wicks back up. I am using parabolic sar indicators as a guide, as well as the descending wedge pattern. Once we confirm the bottom I will close a percentage of shorts and let the rest ride in the bearish instance we fall through. At the same time I will also open some longs with a stop loss below the pivotal support level .

Current view - 65% Bullish Double Top will Occur / 35% Bearish drop through key support
Jul 22
Comment: We are half an hour away from flipping parabolic sar as well as a fisher transform bearish cross.
Jul 22
Comment: Breakdown of head and shoulders followed by subsequent retest of neck line. We likely see another small drop followed by a second retest that won't make the neck line but is something to be wary of when moving stops further into profit. After the second failed retest of the neck line we will drop with a couple ups and downs similar to the faint pink line highlighted below. My stops have been moved further into profit @10,490. Note: This pattern is looking more and more like the bullish scenario will play out. I am now probably 70% bullish double top, 30% bearish diamond top. Looking at higher time frames, if the bullish double top plays out we will actually form an even bigger diamond top reversal pattern - so this could very well be the catalyst to send us back to 2-3K.
Jul 23
Comment: Stops moved further into profit at 10,300. Current ROI 851% on Deribit and 783% ROE on Bitmex @90X leverage (from 10,857 entry).
Jul 23
Comment: Not the bottom. Looking like it could push up and wick to the 100 MA/200MA which are confluencing with the red resistance line in the screen shot below before a further drop. This is around 10,290-10,300.

Between 9580 to 9460 is where I am targeting longs. Stops in profit moved slightly higher to 10,335 to prevent being stopped out on a wick to the 100MA/200MA.
Jul 23
Comment: Switching to longs. Updated idea published shortly.
Jul 23
Trade closed: target reached: Target for short reached
Based on 4h rsi, we still need several bars to bottom
Nice Chart ! so, will you make a long position around 9,500 ?
@binlionaire, Hey, I will start taking longs 9700 and below. My original chart when I first determined this pattern has been fairly spot on and I had the bottom at 9700 on that chart -
@binlionaire, Still need to consider that we could fall through so stop losses are a must for any long. I will do a new analysis though when I feel we are at the bottom and when I have entered, I digress - somewhere between 9700 and 9300 is where I am thinking about switching to longs. I am looking for a certain pattern that will indicate the bottom is in and will share once I find it.
Nice one, I was literally just charting this scenario out myself. :)
I think we're going to drop to 9k in a couple of hours...
+1 Reply
Butcher_of_Bitmex liquidcactus
@liquidcactus, Thanks, this is my favourite fractal to trade as it is super profitable when switching between longs and shorts. I could see it coming a mile away back on the 16th of July
liquidcactus Butcher_of_Bitmex
@Butcher_of_Bitmex, nice one, looks pretty much what is playing out.
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