BTC is currently in a rising channel. We have all been observing this formation, initially thought it as a rising wedge but after the latest bounce at 37150USD, it looks like a "nice" symmetrical rising channel with around 8.5% width. We are already moving towards the 5 bounce around the 41800USD area, which so happens to be the January ATH, a very strong resistance.
Channels are nice to trade because they are pretty predictable in their moves. They don't always go exactly 100% up and down, and there might be some sideways action, but ultimately they will either bounce or breakout. Every ascent/descent can be traded at the trendline. The idea is to wait and see if there is going to be a breakout. If the breakout is confirmed we can trade that. If not, we can trade the move (downside or upside) into the channel.
Here is what it could happen:
1) A bounce around the 41800USD level and a descent toward the lower trendline of the channel, around the 39000USD. Further bounces could happen. These can be traded nicely with long/shorts.
2) BTC manages to break the resistance at the top trendline (and the 41800USD level) with a breakout. There will be a lot of energy there. This leads to a short/mid term bullish outcome. BTC of course can bounce hard at around 50,000K and come down quickly confirming a long term bear market, or it could keep ascending towards a new ATH.
3) A breakout to the downside. This is unfortunately the most likely scenario. A rising channel is a bearish formation. We also have confirmation with the decreasing volume and the bearish divergence on the RSI. The target is the beginning of the formation at around 36500USD. This is not a confirmation of a bear market. It could easily bounce back upwards after that.
What I'm thinking to do right now?
I will be holding my long-term portofolio as I always do.
I'm also running a low-risk margin account with several high cap alts. I will wait for either a breakout at the top of the trendline and the Jan ATH (and take no action) or a bounce downwards at that level in which case I will be selling off the whole margin account to Tether and then wait for until we meet the bottom trendline. If there is a bounce I will be buying everything again, rinse and repeat. If there is a breakdown, I will be waiting till the target is complete and take it from there.
Obviously one can play this with longs and shorts. Do mind we are at 4 bounces. A 5th bounce pretty much "secures" the channel formation but then the chance of a 6th bounce is much lower and we will very likely be heading for a breakout. If there is no 5th bounce and we go sideways for a while, this formation could be invaliated.
Obviously all the above are my opinion. Do your own research. Not financial advice.
Comment:
Also, don't underestimate the possibility of a heads and shoulders formation if there is a failure to raise above the 40,000USD level. That would take us down to around 35,000USD.
Trade closed: target reached:
The ascending channel was "successful". It never reached the top trendline to test the Jan ATH and failed the bottom trendline. It dropped down to the beginning of the formation. As mentioned, there is also a heads and shoulders playing out with target a bit lower.