I haven't written about bitcoin in a while. After the early March breakdown, I felt somewhat lost as all my major trendlines were shattered aggressively. The nice thing though, is the March low provided a key point to identify long term dynamic supply and demand.
A few of my personal opinions on bitcoin technical analysis:
1. Log charts -- When considering price movements from $1 to $20000 to $100K, it's important to appreciate price in terms of percentages, in other words, the buying necessary to raise the chart from $1 to $100 should be the same as $1K to $100K.
2. I don't care about candles -- I appreciate I'm in the extreme minority on this point but hear me out: Candles and their meaning revolve entirely around opening and closing prices with highs and lows during that session. Bitcoin has no sessions. When the markets closed at 4 PM in New York, that price would indicate that all the traders in the world were comfortable holding that position overnight. That was very significant. Even more so, a weekly close indicated comfort with holding a position over the weekend. This is even more significant.
**The entire theory behind Japanese candlestick trading revolves around action during a defined trading session.**
With bitcoin, there is no market close and that significance doesn't exist. Therefore I don't care about the candle close. It's an arbitrary price based on a timer and nothing else. I can trade exactly the same way 30 seconds before a candle close as I can 30 seconds after. Therefore, I only care about highs and lows and turning points in the trading that create trends and supply/demand zones, not the specific shape or pattern of the candles themselves.
Back to trends:
A few simple but crucial rules about trend lines:
1. Trend lines should connect major lows for an uptrend or major highs for a downtrend.
2. Lines can be broken as long as the previous low/high isn't broken as well.
Rule 2 is particularly contentious: I've read rules suggesting any close below a trendline breaks the trend (again back to why I don't care about closing prices on bitcoin candles). Additionally, other rules exist such as "3%" or another percentage below or above a given line. I can't really dispute this idea other than it feels arbitrary. Therefore I stick to trend lines that connect lows or highs and maintain them as long as the previous low/high wasn't broken.
So now for the long term trends that bitcoin appears to be following. I want to point out 4 key dates that created extreme highs and lows over bitcoins existence: 11/25/2013, 8/17/2015, 12/11/2017, and 3/9/2020. These dates create a perfect parallel channel. When the low was made on 3/9/2020, I was amazed about how it basically created this perfect channel parallel to the line connecting the 2013 and 2017 highs.
Stretching these lines out (the big red lines framing the price action), we can begin to develop predictions for the next major highs and lows that may develop over the next decade. Could the upper level of the channel create a 2021 post-halving target around 150K?
The next trend line is the bright green uptrend line that I had been following until the 3/9 collapse. It connects the uptrend from 2016 with the 2018 low and eventually the local December 2019 low before the January 2020 bull swing run. At the time, I believed the 12/2019 low was going to be the low before the next major bull run, but 3/9 shattered the line considerably. But did it completely invalidate this line? This brings me back to rule 2 for trendlines, a trend may be broken as long as it does not take out the previous low. Well, by that rule, the green trendline is still intact, as the 2018 low hadn't been violated. And with the most recent pump, it appears the green trendline may continue to provide support/demand.
So what to look for next?
Bitcoin has been in an intermediate downtrend since the june 2019 high. The trendline has provided supply/resistance in February, and now again a few days ago. This line will intersect with the green demand/support line in a months time, creating a converging triangle pattern. I'm looking for the price to breakout in one way or another, but ideally to the upside. This breakout or breakdown in the next month should be instructive.
A few of my personal opinions on bitcoin technical analysis:
1. Log charts -- When considering price movements from $1 to $20000 to $100K, it's important to appreciate price in terms of percentages, in other words, the buying necessary to raise the chart from $1 to $100 should be the same as $1K to $100K.
2. I don't care about candles -- I appreciate I'm in the extreme minority on this point but hear me out: Candles and their meaning revolve entirely around opening and closing prices with highs and lows during that session. Bitcoin has no sessions. When the markets closed at 4 PM in New York, that price would indicate that all the traders in the world were comfortable holding that position overnight. That was very significant. Even more so, a weekly close indicated comfort with holding a position over the weekend. This is even more significant.
**The entire theory behind Japanese candlestick trading revolves around action during a defined trading session.**
With bitcoin, there is no market close and that significance doesn't exist. Therefore I don't care about the candle close. It's an arbitrary price based on a timer and nothing else. I can trade exactly the same way 30 seconds before a candle close as I can 30 seconds after. Therefore, I only care about highs and lows and turning points in the trading that create trends and supply/demand zones, not the specific shape or pattern of the candles themselves.
Back to trends:
A few simple but crucial rules about trend lines:
1. Trend lines should connect major lows for an uptrend or major highs for a downtrend.
2. Lines can be broken as long as the previous low/high isn't broken as well.
Rule 2 is particularly contentious: I've read rules suggesting any close below a trendline breaks the trend (again back to why I don't care about closing prices on bitcoin candles). Additionally, other rules exist such as "3%" or another percentage below or above a given line. I can't really dispute this idea other than it feels arbitrary. Therefore I stick to trend lines that connect lows or highs and maintain them as long as the previous low/high wasn't broken.
So now for the long term trends that bitcoin appears to be following. I want to point out 4 key dates that created extreme highs and lows over bitcoins existence: 11/25/2013, 8/17/2015, 12/11/2017, and 3/9/2020. These dates create a perfect parallel channel. When the low was made on 3/9/2020, I was amazed about how it basically created this perfect channel parallel to the line connecting the 2013 and 2017 highs.
Stretching these lines out (the big red lines framing the price action), we can begin to develop predictions for the next major highs and lows that may develop over the next decade. Could the upper level of the channel create a 2021 post-halving target around 150K?
The next trend line is the bright green uptrend line that I had been following until the 3/9 collapse. It connects the uptrend from 2016 with the 2018 low and eventually the local December 2019 low before the January 2020 bull swing run. At the time, I believed the 12/2019 low was going to be the low before the next major bull run, but 3/9 shattered the line considerably. But did it completely invalidate this line? This brings me back to rule 2 for trendlines, a trend may be broken as long as it does not take out the previous low. Well, by that rule, the green trendline is still intact, as the 2018 low hadn't been violated. And with the most recent pump, it appears the green trendline may continue to provide support/demand.
So what to look for next?
Bitcoin has been in an intermediate downtrend since the june 2019 high. The trendline has provided supply/resistance in February, and now again a few days ago. This line will intersect with the green demand/support line in a months time, creating a converging triangle pattern. I'm looking for the price to breakout in one way or another, but ideally to the upside. This breakout or breakdown in the next month should be instructive.