Bitcoin: Short Squeeze Pattern, 8500 Next Resistance?

Bitcoin has established a higher low off the 6800 level which we interpret as a sign of strength, especially within the context of the 7275 broader support level. As long as the 7K level holds, price is likely to break higher and into the low 9ks at minimum. Timing is less about "predicting" and more about about letting the market prove itself by demonstrating strength or weakness as an expression of order flow.

On Friday, our swing trade strategy generated a new buy signal and we are long from 7550. In this article, I will highlight the price action possibilities that will prompt us to take further action, or not.

1. A break and decisive close above 7900 can take price into the mid 8Ks or even 9Ks because of the amount of short covering or forced liquidations that follow. This is our ideal situation and requires no further action since both of our targets are within the 9 to 10K area (higher low often leads to higher high).

2. A decisive close below 6800 can lead price back to the 6550 reversal zone boundary (we will be stopped out by this point). The 6550 area is the next high probability location to look for long setups IF price gets there.

3. 8500 is the next minor resistance level. IF price action turns here (bearish pin bar) we will most likely close half of our swing trade in order to reduce risk and allow the market to breath.

4. 7275 and 5464 is still a high probability reversal zone for POSITION trades. IF price revisits this area, and shows patterns of stability again, we will add to our inventory (which is a separate strategy from our current swing trade).

5. We continue to categorize the structure between the 14K peak and 6800 low as a "corrective consolidation" or Wave 2. We will consider patterns and short term price action (candle sticks) within the context of a range bound market, NOT a trend.

6. If price takes out 10,500 and follows through (meaning no fake outs), then Wave 3 is likely in play which can lead price back to 20K. UNTIL this break out occurs, projecting outrageous price targets is unreasonable and unjustified. There is no way to tell from a chart WHEN such an event will take place.

Many get caught up in the fundamentals, hype, and drama that surrounds this market but none of it will help in terms of timing (especially over the short term). Sentiment drives price, NOT logic. Charts do provide actionable information because of 3 key ideas: markets trend, price is a discounting mechanism and history repeats itself. Learn what these actually mean and you will be less distracted by noise and more in tune with the probabilities of order flow.