The maturation cycle has four stages of an asset’s life.
Stage 1: Basing Area (Consolidation) S1 is when nothing noteworthy is happening. It can last for an extended period, from months to years, and is caused by a poor overall market environment.
Stage 2: Advancing Phase (Accumulation) The transition from S1 to S2 may begin with little or no warning. There are no major announcements or news. However, one thing is certain: a proper S2 will show significant volume as the asset is in strong demand on big up days, and volume will be relatively light during pullbacks.
Stage 3: Top Area (Distribution) During S3, the asset is no longer under extreme accumulation. Instead, it is changing hands from strong buyers to weaker ones. Smart money that was bought early when the asset emerged onto the scene is now taking profits, selling into final signs of price strength. As that occurs, buyers on the other side of the transaction are weaker players who know about the asset because it has made such a dramatic run and captured headlines. In other words, the long trade in the asset has become crowded and too obvious.
Stage 4: Declining Phase (Capitulation) During S4, earnings models are generally revised downward, which puts more selling pressure on the asset. The S4 selling phase may continue for an extended period until it's finally exhausted, and the asset enters another period of neglect. There are more down days and weeks on above-average volume than up days and up weeks on above-average volume.
What should be expected at Stage 4? A Bear Trap may occur that leads to continuing declining phase up to the consolidation area. Another option, after approximately 50% of the asset correction - a new growth cycle will begin, updating the previous high.
These are two book scenarios. What scenario do you expect? Write in the comments below!
Best regards, EXCAVO
Comment
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Useful tips: - It's better to avoid S1/S3/S4, especially for the newcomers. - You'll make 90% of your profits during S2. - Trade less so you'll be more profitable. - 90% of the time, price is in consolidation, and 10% - directional. Your job as a trader is to find directional assets.
@watchtrend, interesting chart. Thanks for sharing.
So I assume you expect the price of Bitcoin to drop to around the 40K level?
I too believe that there may be a big drop but I am only 50% sure that it might happen.
We could be seeing a bear trap in the end instead of a bull trap.
And here's why:
This is my chart for BTCEUR BINANCE
Take a closer look:
You will see that when yesterdays candle closed below trend line AND below SMA 25, SMA 50 and SMA100 and with high volume, it was an obvious signal that a drop is imminent.
BUT... there is several support levels that support a different theory.
Specifically speaking about the price level (40K euro), the obvious trend line in which from resistance is expected to act now as support,
and let's not forget about the SMA200 which historically has been major support every single time it was conquered after a long time of being below it.
Here's another snapshot to give vision to my words:
Now, if you measure it:
It only takes about 6% of price increase to conquer that top down trend line (resistance) and if that happens I believe Bitcoin will start heading upwards and probably with a very fast pace.
Will it create a new ATH?
Who knows.
Will it crash down to 20K or lower.
If it does then Bitcoin will be on discount ;-)
So, to sum this up.
EITHER WAY, STAY ALERT!!!
There is gains to be made ;-)
The_Profit_Prophet
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@The_Profit_Prophet, also take note of the Fibonacci Channels which are also expected to act as support (or resistance).
algocowboy2030
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BTC supply shock makes it seem like first (bull) scenario more likeky. Also, Wouldn’t that be a bull trap in the second scenario and not a bear trap?
masoud_2020
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Bitcoin is forming a head and shoulders pattern and then falling to $ 18,000
Thanks for sharing this :)
EDIT: A bear trap could happen IMO at the end of the second S1 with a candle closing below support then immediately shooting up (squeeze).