Elon Musk has been on a tirade against Bitcoin on his twitter - but the signs of weakness were on the chart well before he started tweeting negatively about it. Let's take a look at what happened, and what to look for next.
First lets break down the price action concepts on this chart.
Weekly Swing Failure - this was a swing high on the weekly chart that price spent some time above - but was sold down after the $COIN IPO. Ultimately, the weekly candle that wicked above the swing high closed below - hence, Swing Failure.
Daily break in Market Structure - I've drawn a line from the previous daily swing lows which were the origin of a large (40% and 27%) up-move. A daily close below these levels signifies a bearish break in Market Structure.
The "Tesla Buys Bitcoin" candle - the significance of this region of price is that there is
Assuming we can't bounce off of this volume gap, I'm looking for a reaction at the $42k weekly swing low, the $38k top of the weekly order block, and the $36k bottom of the weekly order block.
If we close below the "
TSLA
candle" on a high timeframe, I do believe we may be in a short-term bear market. If this happens, expect altcoins to take a dive as well.
Will, OptionsSwing Analyst
First lets break down the price action concepts on this chart.
Weekly Swing Failure - this was a swing high on the weekly chart that price spent some time above - but was sold down after the $COIN IPO. Ultimately, the weekly candle that wicked above the swing high closed below - hence, Swing Failure.
Daily break in Market Structure - I've drawn a line from the previous daily swing lows which were the origin of a large (40% and 27%) up-move. A daily close below these levels signifies a bearish break in Market Structure.
The "Tesla Buys Bitcoin" candle - the significance of this region of price is that there is
- A volume inefficiency (Price has only traded upwards through it, never down into it)
- People who bought Bitcoin based on the news are still in profit. A drop below this region can easily cascade into more selling as these news-buyers begin to close their positions to avoid further losses.
Assuming we can't bounce off of this volume gap, I'm looking for a reaction at the $42k weekly swing low, the $38k top of the weekly order block, and the $36k bottom of the weekly order block.
If we close below the "
TSLA
candle" on a high timeframe, I do believe we may be in a short-term bear market. If this happens, expect altcoins to take a dive as well. Will, OptionsSwing Analyst
Comment:
Weekly swing low has failed to function as a support. Coming into the January candle close highs here - loss of this and we re-test 39.5k, then our weekly orderblock in the 30s.
Comment:
Monster down move today across the board. It's no surprise where we've landed after the snap-back off the lows - right at the base of the $TSLA candle.
I hope this has demonstrated that these types of events, though they seem like they come out of nowhere, show signs before they occur. Happy trading!
I hope this has demonstrated that these types of events, though they seem like they come out of nowhere, show signs before they occur. Happy trading!