Bitcoin: Period of Consolidation

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
I thought I would try another one after publishing an idea on the 4H timeframe, this time I looked at the daily for BTC . I do not trade Bitcoin and do this as a mental exercise, using the same tools / methods I use for trading Forex. You can find the link to the 4H chart under Related Ideas.

The currency traded inside a bearish parallel channel for 286 days, before breaking to the upside on March 3rd. After this breakout it failed to breach the 500 retracement of the swing low that started at November 13th last year and started trading inside a new, this time much narrower bearish channel . Zooming out a bit reveals price actually entered a period of consolidation represented by a descending triangle with the horizontal support at the 210 handle. This level coincides with the daily support I plotted in the 4H chart. Price is nearing the apex, which means a break out is due. Descending triangles at the back of a downtrend have the tendency to break to the downside, but I like to see evidence of price action before coming to a conclusion so I take both possibilities into account.

All in all I do not see an imminent trade, but with a break out of the triangle there would be two possibilities:
  • With a break below and close below the support level there is a short opportunity. For a target I would look to the low of January 13th near the 150 handle
  • With a break above and close above the upper trend line of the triangle there is a long opportunity. For the target I would extend the height of the range within the triangle in the direction of the breakout which would have confluence with the prior mentioned 500 retracement level at the 301 handle
I forgot to post a follow up comment to this one. Price followed the long scenario as plotted on the chart: it broke above and closed above the upper trend line of the triangle and hit the long target last month at the 500 retracement of the prior swing low.
What does it take for a descending triangle breakout to be confirmed? Is it too early to say that UP is the decided direction?
+1 Reply
For me a break out to the upside is confirmed with a break above & close above the upper trendline. That criteria has been met. Aggressive traders could be long here, conservative traders could wait for a retracement back into the broken trendline to test it as support and go long after (if it holds). Don't take this as direct trading advice, its just my view on bitcoin at the moment.
The breaking of the resistance from the narrower channel will be my signal and we are not far from it. We are now heading further from 215 support, guess we won't test it again
+2 Reply
blackswan purpurato59
that seems to be the case... there's been very significant news in regards to MtGox liquidation so that might have dampened the mood.
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Nice analysis, but I feel we will test your support line next before the market decides which direction it will go.
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That is possible, I am waiting for this daily candle to close to see if the price will remain inside the triangle. Thank you for responding.
Hi Jasper, looks like we're inching towards to 'break above' possibility...
+1 Reply
JazzForex blackswan
You are right, price is barely being contained by the consolidation pattern, it looks like we might see a break above soon.
+1 Reply
Daniel.B JazzForex
Oh my... You were serious about charting BTC lol =D
+1 Reply
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