BTC trying to (temporarily) reverse the trend. Will it succeed?

BITMEX:XBTUSD   Bitcoin / US Dollar Perpetual Inverse Swap Contract
All eyes are currently on the potential inverse H&S that might be forming its right shoulder on this pullback, and if completed it could take the price to around 5300-5400 area which is the projected target of the pattern.

As we've all noticed, when everyone expects something due to it being obvious on the chart, BTC tends to do the opposite, so don't put too much hope into this iH&S pattern.
It's just an idea for now, so we can have it on our radar.
The major trend is still down.
A break of 4400 is still the main condition for those higher prices mentioned above, and without it, none of these patterns matter much.

Nevertheless, we can't ignore (at least a temporary) reversal pattern forming for over a month now.
The longer the time period over which the pattern forms, the more reliable it is and the larger the move it makes once (and if) completed.

The key areas for this scenario are marked on the chart above.
3470-3400 zone must hold, otherwise, we are likely to see 3100s retested or even new lows.

If we see a good reaction (ideally) from around 3560, that would be a first positive step towards the iH&S pattern completion.

Note that 3650 was/is the minimum retracement necessary for this to play out.

I see two ways to trade this:

1. Enter with a speculative position size in the "ideal entry zone" marked on the chart with a stop loss below 3400.
2. (safer, more conservative way) Wait for the price to breakout and close a candle above 4400 pivot point , then buy the breakout or the pullback of that move. This way you get less profits but a lot more reliability in your trade.

It all depends on your trading style and risk apetite.

Either way, stop loss and risk management is crucial here, due to the main trend still being down.
You don't want to get caught in a long position if the main trend continues to the downside.

Note that this is a 12h timeframe chart, so it may take days to play out.
Comment: The price is now entering the key support zone for the iH&S pattern where the right shoulder is being formed.

What do we want to see here?

When it comes to inverse Head & Shoulders (local) bottom pattern (unlike normal H&S which forms at the top), the volume is extremely important and will tell us a lot about how likely this is to play out.

The left shoulder, formed on the initial sell-off is usually the highest volume move (selling climax in Wyckoff's terms).
The head, which marks a lower low can also be high volume, but it's not necessary for the pattern to be valid.

The crucial volume part is on the right shoulder which the price is starting to form now.
This is where we find out whether this is just a higher low, where the bears fail to push it lower due to lack of selling interest (low volume), or if this will in fact be sold off even more and go for new lows towards 3k again (high volume selling).

Ideally we want to see the volume here not surpassing the volume we had during the move to the upside (from the head bottom at 3126 towards 4200).

Then we want to see the price go up towards the neckline again (near 4300), and then finally we must see a strong volume breakout above 4350-4400, to confirm the inverse H&S pattern which would also be a major (and the safest) buy signal towards 5k.

Comment: Beautiful.

Still not convinced this is the actual move towards the neckline, but the ideal entry zone marked on the chart already gave very nice profits so far.

Comment: This is playing out absolutely perfectly so far.

There is one last step we need to see during this coming week, and that is a strong breakout above 4350-4400 pivot area (iH&S neckline).

Then the real fireworks will start.

Comment: The price is starting to show early signs of weakness and hesitation just below the resistance and the iH&S neckline.

The moves were perfect up to this point, but now the iH&S pattern could become questionable.

It can still play out, but if so, it has to happen by the end of this week, otherwise, if it stays at these levels chances are higher it makes another drop towards lower supports starting from 3910, then 3870, then 3786.

For another attempt at a (still possible) breakout later during the week, ideally we see 3910-3870 area hold.

On the bigger picture, 3780 has to hold for any bullish momentum to stay alive, otherwise a daily candle close below that, and it will turn into bears game again.

A rising wedge is being formed with these failed highs (not completed yet), and if it completes (indicating buyers exhaustion), it could mean bulls are losing this chance too.
The wedge could offer potentially good short entries if we see a pullback down to 3910-3870, then a bounce for one last attempt towards 4149-4200 followed by a rejection.

Either way, our ideal entry (buy) zone from more than a week ago at 3580-3560 gave us near-perfect entries and whether this iH&S plays out or not, good profits should have been locked in by now already, and the rest can be left open with stop at or near entry for a risk-free trade.

Comment: 1st target of the wedge reached at 3780.

This is also the last line of support I mentioned in my previous update above.
Price closing below 3780 would mean more red will follow.

This was a high volume 4h candle, and it confirmed the weakness in this market.
3870-3910 (previous support) area will now be the resistance above.

This candle cut through that support like it was vacuum.

If we don't see some kind of a quick reversal (the price bouncing to above 3870-3910 and closing there within these 30 minutes (4h candle close), then this drop will likely have a target at 3650-3580 area as well (which happens to be the full/max target of the wedge)

Comment: 2nd target, 3580 reached as well.
The wedge has now reached its maximum target (doesn't mean we can't see more downside, but the pattern targets have been satisfied).

This is now the 2nd support zone (3650-3550) and we could see a dead cat bounce from here.
The fall has been quite fast and strong, so be careful trading these moves.

Holla and Merry Christmas :)
and yes, true,

eyupium EdwView
@EdwView, It will be interesting watching this form over the next days. :)
EdwView eyupium
@eyupium, Hi, my opinion after a more thorough analysis,
eyupium colorblue
@colorblue, You mean the guy who actively promoted Bitconnect? CryptoKirby? What about him?
Nice and easy explanation of your view on how it may play out.
I also have a very similar scenario as you and guess most pundits out there but as you mentioned regarding when most of traders having a similar outcome of what is more likely to happen, bitcoin generally does the unexpected in most cases.
Thank you for your time and effort on your work here and I am now a new follower.
eyupium stevegong
@stevegong, True. That is I don't put too much probability on this playing out, since the inverse H&S is just an idea in our minds at this point. The price doesn't care about what we thing.
It hasn't even formed the most important part yet (the right shoulder) where there are first clues of whether it can actually play out or not (based on volume).

Luckily we will see that over the next few days and will have a clearer picture as to what is more likely to happen.

I'm glad you find it useful!
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