permuting possible paths - where/when to expect the retest
let's be honest - the current price action continues to look dismal, and market sentiment isn't doing bulls any favors.
(1) for the first time since this bull run began, we dipped below the bull trend line AND got rejected on the retest. look at any chart and you'll see this usually happens with a head & shoulders or bump & run reversal.
(2) we just hit a new local low, below the established support at the bottom of the triangle.
(3) this low also dipped below the neckline of the major H&S top, effectively completing the right shoulder.
while this all sounds bad (and it is), i'll reiterate something i've been saying since the crash in may: we're going to need to retest that down trend line at some point.
here are some potential paths to that retest. i think it will probably be a news headline/tweet/etc that decides which path we take, but i'll tell you which i think is most/least likely from where we're sitting now.
(1) bulls rally straight there. given everything mentioned above, and the ocean of resistance between $40k and $45k, this seems the least likely.
(2) H&S pattern continues to play out. in this scenario, i see two landing zones/bottoms: (a) $24k-$25k: CME contract gap that many traders have been eyeing. i think it's stupid, but the market doesn't care what i think. (b) $20k - prior ATH. i'm fairly confident price won't go below the prior cycle's ATH at $19666. depending on where we bottom out, the retest would likely be somewhere in the 30s.
(3) continued ranging/consolidation before a retest around $42.9k. i think this is the most likely scenario for a couple of reasons: first, i don't think either the bulls or the bears have the balls to make either of the first two scenarios happen. second, if there is a longer period of consolidation without another leg down, bulls will feel more comfortable to make a push, and if/when they do, they'll run out of steam around the strong resistance at $42k-$43k.
i'll be looking for some trading setups with these scenarios in mind, depending on how exactly it all unfolds. immediate term i'm watching for a rejection from the minor down trendline and/or falling out of this pathetic little wedge. ideas to follow.
side note that this right shoulder has formed a falling channel, but i highly doubt that will continue much longer. wayyy too much volatility.
(1) for the first time since this bull run began, we dipped below the bull trend line AND got rejected on the retest. look at any chart and you'll see this usually happens with a head & shoulders or bump & run reversal.
(2) we just hit a new local low, below the established support at the bottom of the triangle.
(3) this low also dipped below the neckline of the major H&S top, effectively completing the right shoulder.
while this all sounds bad (and it is), i'll reiterate something i've been saying since the crash in may: we're going to need to retest that down trend line at some point.
here are some potential paths to that retest. i think it will probably be a news headline/tweet/etc that decides which path we take, but i'll tell you which i think is most/least likely from where we're sitting now.
(1) bulls rally straight there. given everything mentioned above, and the ocean of resistance between $40k and $45k, this seems the least likely.
(2) H&S pattern continues to play out. in this scenario, i see two landing zones/bottoms: (a) $24k-$25k: CME contract gap that many traders have been eyeing. i think it's stupid, but the market doesn't care what i think. (b) $20k - prior ATH. i'm fairly confident price won't go below the prior cycle's ATH at $19666. depending on where we bottom out, the retest would likely be somewhere in the 30s.
(3) continued ranging/consolidation before a retest around $42.9k. i think this is the most likely scenario for a couple of reasons: first, i don't think either the bulls or the bears have the balls to make either of the first two scenarios happen. second, if there is a longer period of consolidation without another leg down, bulls will feel more comfortable to make a push, and if/when they do, they'll run out of steam around the strong resistance at $42k-$43k.
i'll be looking for some trading setups with these scenarios in mind, depending on how exactly it all unfolds. immediate term i'm watching for a rejection from the minor down trendline and/or falling out of this pathetic little wedge. ideas to follow.
side note that this right shoulder has formed a falling channel, but i highly doubt that will continue much longer. wayyy too much volatility.
