Diamond breakout then H&S breakout then sub 3k!
Updated
Good day Traders
Bitcoin seems to be following the H&S pattern from my previous post, and currently printing the right shoulder, as well as a potential bottom diamond pattern, which could break in either direction since it's both a reversal and a continuation pattern.
We still have major trend line resistance going back from our ATH and we're sitting right at resistance as we speak. Our daily SMA50 is also not far above us. If this does end up breaking to the upside, I suspect there will be one more drop towards diamond support (around $3500) before we break upwards, in order to build enough momentum and volume to break through both that resistance and the daily SMA50.
I think the height of the right shoulder will be dependent on the direction of the diamond break out. A break to the upside, above the major trend line resistance, should take us up to between $3870 and $3920 where our previous uptrend support could be tested as resistance. This is also more than a 61.8 fib retracement after the wave from the head to our neckline, which should give us a 161.8 fib fib extension target of $3090 before we correct up to potentially retest the H&S neckline as resistance, and then dropping from there.
If the major trend line resistance and daily SMA50 resistance is too strong to break above, the right shoulder height might be capped at around $3720 which is a 38.2 fib retracement after our wave down from the head to the neckline. Be wary of a long wick fakeout above the diamond resistance before closing below that resistance on the hourly and heading in the opposite direction. Stop hunters are loving this low volume at the moment (hence all these bart moves lately). We might have a long squeeze wick take us above the 38.2 fib retracement mark ($3723) and briefly above the TR and daily SMA50 before turning back down again and breaking in the opposite direction (same applies vice versa).
If we get a 38.2 fib retracement, then I'll be looking for a 138.2 fib extension target of around $3240 where we should then find support above the weekly SMA200 before correcting upwards to potentially retest the neckline as resistance and then dropping from there.
The upside target for the diamond is above $3800 and the downside target is below $3270 (around our weekly SMA200 support).
The target of the H&S is somewhere around $2800 - $2870, then our next major support is around $2500, however, I think this might just be our capitulation and I have a revised target of $2160 for our bottom.
The reason I think that this might be our bottom, is because:
(1) we had a 38.2 fib corrective retracement from our 2018 low which gives me a 138.2 fib extension target of $2160
(2) This will be a roughly 50% drop from our recent swing high of $4213 and capitulation is often characterized by a 50% drop (although it could have a further 50% drop and so forth, although no one really knows).
If the H&S becomes invalidated and we break above the SMA50, TR, and right shoulder, then based on recent volume and price action, the upside is probably limited to between $4100 - $4300 before resuming the down trend.
We do have strong hidden bullish diversion on the 1D StochRSI but the question is when will this actually play out? It might potentially play out at our weekly SMA200 (around $3300), however, if it plays out after finding our bottom support (the bottom swing low could be in the lower 2k area), then I expect a very large move to the upside afterwards, similar to the 100% upside move after capitulating in 2014/2015.
Something else to consider is our Bitfinex shorts. You'll see our shorts are continuing to drop off, however, the market rarely follows the herd, and if you look at our recent history, every time our shorts come close to around the 18000/19000 area, we have had a substantial drop. We are now closing in on this area.
Besides that, we also potentially have the start of a new weekly cross on the StochRSI which does not usually end well for the bulls as can be seen by the yellow ellipses.
Entry: Break of neckline support
TP 1:
$3240 (138.2 fib extension target for right shoulder height)
or
$3090 (161.8 fib extension target for right shoulder height)
TP 2: $2880
TP 3: $2160
Stop: Above right shoulder
Bitfinex shorts:
The StochRSI cross on the weekly:
2014/2015 bottom:
Good luck and happy trading!
Bitcoin seems to be following the H&S pattern from my previous post, and currently printing the right shoulder, as well as a potential bottom diamond pattern, which could break in either direction since it's both a reversal and a continuation pattern.
We still have major trend line resistance going back from our ATH and we're sitting right at resistance as we speak. Our daily SMA50 is also not far above us. If this does end up breaking to the upside, I suspect there will be one more drop towards diamond support (around $3500) before we break upwards, in order to build enough momentum and volume to break through both that resistance and the daily SMA50.
I think the height of the right shoulder will be dependent on the direction of the diamond break out. A break to the upside, above the major trend line resistance, should take us up to between $3870 and $3920 where our previous uptrend support could be tested as resistance. This is also more than a 61.8 fib retracement after the wave from the head to our neckline, which should give us a 161.8 fib fib extension target of $3090 before we correct up to potentially retest the H&S neckline as resistance, and then dropping from there.
If the major trend line resistance and daily SMA50 resistance is too strong to break above, the right shoulder height might be capped at around $3720 which is a 38.2 fib retracement after our wave down from the head to the neckline. Be wary of a long wick fakeout above the diamond resistance before closing below that resistance on the hourly and heading in the opposite direction. Stop hunters are loving this low volume at the moment (hence all these bart moves lately). We might have a long squeeze wick take us above the 38.2 fib retracement mark ($3723) and briefly above the TR and daily SMA50 before turning back down again and breaking in the opposite direction (same applies vice versa).
If we get a 38.2 fib retracement, then I'll be looking for a 138.2 fib extension target of around $3240 where we should then find support above the weekly SMA200 before correcting upwards to potentially retest the neckline as resistance and then dropping from there.
The upside target for the diamond is above $3800 and the downside target is below $3270 (around our weekly SMA200 support).
The target of the H&S is somewhere around $2800 - $2870, then our next major support is around $2500, however, I think this might just be our capitulation and I have a revised target of $2160 for our bottom.
The reason I think that this might be our bottom, is because:
(1) we had a 38.2 fib corrective retracement from our 2018 low which gives me a 138.2 fib extension target of $2160
(2) This will be a roughly 50% drop from our recent swing high of $4213 and capitulation is often characterized by a 50% drop (although it could have a further 50% drop and so forth, although no one really knows).
If the H&S becomes invalidated and we break above the SMA50, TR, and right shoulder, then based on recent volume and price action, the upside is probably limited to between $4100 - $4300 before resuming the down trend.
We do have strong hidden bullish diversion on the 1D StochRSI but the question is when will this actually play out? It might potentially play out at our weekly SMA200 (around $3300), however, if it plays out after finding our bottom support (the bottom swing low could be in the lower 2k area), then I expect a very large move to the upside afterwards, similar to the 100% upside move after capitulating in 2014/2015.
Something else to consider is our Bitfinex shorts. You'll see our shorts are continuing to drop off, however, the market rarely follows the herd, and if you look at our recent history, every time our shorts come close to around the 18000/19000 area, we have had a substantial drop. We are now closing in on this area.
Besides that, we also potentially have the start of a new weekly cross on the StochRSI which does not usually end well for the bulls as can be seen by the yellow ellipses.
Entry: Break of neckline support
TP 1:
$3240 (138.2 fib extension target for right shoulder height)
or
$3090 (161.8 fib extension target for right shoulder height)
TP 2: $2880
TP 3: $2160
Stop: Above right shoulder
Bitfinex shorts:
The StochRSI cross on the weekly:
2014/2015 bottom:
Good luck and happy trading!
Note
Bitcoin's shorter term view: Drop to around $3440 then up to $3870-$3930 before the storm from my previous post begins:
Although i'm bearish for the next couple of weeks, I think we might go up one last time to print the rest of that right shoulder of the H&S covered in my previous post, and then we will drop substantially. Besides the bottom diamond pattern, we also have a downward sloping flag pattern, which is a bullish reversal pattern.
As you can see on the 4H, buying volume is drying up and we have bearish divergence on the 4H MFI so I'm expecting a drop to the flag support at around $3440 (which is above neckline support of our larger H&S covered in previous post), before moving back up and breaking above flag resistance with a 61.8 fib retracement towards our $3870 - $3930 resistance.
We now have a number of potentially bullish patterns for the very short term:
Support above H&S neckline
Bottom diamond pattern
Downward sloping flag pattern
but then things turn bearish as we meet strong resistance (around $3870-$3930). Bearish signals after the rise:
Head and shoulders pattern
Daily SMA50
Trend resistance from our ATH
Potential downwards cross of our weekly StochRSI
Bitfinex shorts falling towards a crucial bearish level
Note
New update:Note
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.