A love triangle we can actually love...
Updated
The Gist
-Symmetrical Triangle formation on the 10 weekly and 60 daily priming for a major breakout.
-21 SMA crossover over the 50 and 100 signifying strength more likely to the upside.
-US 30Y yields now below 3-month notes further exacerbating the inverted yield curve.
The Lowdown
Trading was never meant for the light-hearted. Especially crypto price actions which can go through cycles faster than a Peloton bike (whose upcoming IPO could value them at 88B, but who the hell owns one yet with a price tag averaging $2,500?). But on a relative basis (and for those HODL’ers out there), was BTC ever really in a bear market? If we look at the past decade, BTC has been the best performing asset outperforming traditional assets such as gold, the Nasdaq, S&P 500, and etc. And if you were one of the unlucky investors that missed the train back in 2017, well there’s still light at the end of the TRIANGLE. With UBS, the world’s largest wealth manager, downgrading their outlook on equities (for the 1st time since the Great Recession) with a underweight rating and the manufacturing PMI recording its first contraction since 2009, having a portion of your crypto might not be a bad alternative.
The Technical
If we take a broad look at the weekly chart, it’s evident that a symmetrical triangle (and don’t get it confused with the wedge or a pennant formation) has formed with the likely anticipation of a breakout or breakdown in a worst case scenario. And it’s even shown on the daily chart with both 21 SMAs above the 50 and 100 indicating bullish momentum. Consolidation of lower highs and higher lows has emerged in a way where the two converging trend lines, with similar slopes, are coming to a point around the psychological 10k line. And to clarify, ascending or descending triangle formations have convergence lines with totally different slopes (usually you will see one of the lines being horizontal rather than diagonal). But in this case a clearly laid out symmetrical triangle has formed which can be used to expect a radical price change in the next coming periods.
To illustrate how powerful this pattern can be seen, back in July through November of 2018, we experienced a symmetrical triangle pattern with lower daily highs and higher daily lows forming over 4 months only to be felt by a bearish breakdown. And in this particular instance, confirmation of this breakdown came from the 21 day SMA as we see it weaving and for the most part, below the 50 and 100.
We can see the same thing happening on the hourly chart earlier this month only to be yet again, felt by a bearish breakout on August 10th after confirmation of the 21 SMA again weaving through the 50 and 100. This type of weaving is an indicator of weakness with falling price action bound to happen.
So the question is now that we have another symmetrical triangle pattern forming, what can we do with it? Well the rule of thumb is that the expected breakout/breakdown price swing is about the same length of the delta between the highest and lowest price point at the beginning of the triangle formation. If you apply the same rule of thumb here (on the weekly chart), a breakout would constitute placing a take profit PT at $15,057 and a breakdown take profit PT at $5,407.
As mentioned earlier, a breakout in this case is more likely due to the confirmation we see with the earlier article I wrote about. The conversion line still hovering above the base line of the Ichimoku Cloud pattern further strengthens this bullish outlook.
From the start of this triangle is when the 21 SMA crossed over the 50 and eventually the 100. Another confirmation we could use to sustain this 2019 bull run.
The Conclusion
A price breakout from this symmetrical triangle pattern is imminent. The bulls have been on the sidelines since June and are ready to charge ahead to the upside. And of course, don’t forget to put into context and realize what macro environment we are in. BTC and Gold have been on the same trading trajectory (almost close to a 1 to 1 correlation) for the past few months with an inverse relationship with equities (down about 4% since the start of the BTC triangle pattern if we use the SPX as a proxy). Market sentiment has been low along with other economic indicators.
And as we have seen a few months back and still to this day, the yield curve has inverted. The CME’s FedWatch tool is projecting a 95% probability of a 25 basis point rate cut at next month’s FOMC meeting. Plainly this means that a cut in interest rates will weaken the dollar, putting upward pressure on commodities, with BTC being one of them. What could also help the BTC bull run are factors such as the ongoing US-China trade war, which for the most part, doesn’t have an ending site just yet.
Follow me on Twitter @crypto67sauce !
-Symmetrical Triangle formation on the 10 weekly and 60 daily priming for a major breakout.
-21 SMA crossover over the 50 and 100 signifying strength more likely to the upside.
-US 30Y yields now below 3-month notes further exacerbating the inverted yield curve.
The Lowdown
Trading was never meant for the light-hearted. Especially crypto price actions which can go through cycles faster than a Peloton bike (whose upcoming IPO could value them at 88B, but who the hell owns one yet with a price tag averaging $2,500?). But on a relative basis (and for those HODL’ers out there), was BTC ever really in a bear market? If we look at the past decade, BTC has been the best performing asset outperforming traditional assets such as gold, the Nasdaq, S&P 500, and etc. And if you were one of the unlucky investors that missed the train back in 2017, well there’s still light at the end of the TRIANGLE. With UBS, the world’s largest wealth manager, downgrading their outlook on equities (for the 1st time since the Great Recession) with a underweight rating and the manufacturing PMI recording its first contraction since 2009, having a portion of your crypto might not be a bad alternative.
The Technical
If we take a broad look at the weekly chart, it’s evident that a symmetrical triangle (and don’t get it confused with the wedge or a pennant formation) has formed with the likely anticipation of a breakout or breakdown in a worst case scenario. And it’s even shown on the daily chart with both 21 SMAs above the 50 and 100 indicating bullish momentum. Consolidation of lower highs and higher lows has emerged in a way where the two converging trend lines, with similar slopes, are coming to a point around the psychological 10k line. And to clarify, ascending or descending triangle formations have convergence lines with totally different slopes (usually you will see one of the lines being horizontal rather than diagonal). But in this case a clearly laid out symmetrical triangle has formed which can be used to expect a radical price change in the next coming periods.
To illustrate how powerful this pattern can be seen, back in July through November of 2018, we experienced a symmetrical triangle pattern with lower daily highs and higher daily lows forming over 4 months only to be felt by a bearish breakdown. And in this particular instance, confirmation of this breakdown came from the 21 day SMA as we see it weaving and for the most part, below the 50 and 100.
We can see the same thing happening on the hourly chart earlier this month only to be yet again, felt by a bearish breakout on August 10th after confirmation of the 21 SMA again weaving through the 50 and 100. This type of weaving is an indicator of weakness with falling price action bound to happen.
So the question is now that we have another symmetrical triangle pattern forming, what can we do with it? Well the rule of thumb is that the expected breakout/breakdown price swing is about the same length of the delta between the highest and lowest price point at the beginning of the triangle formation. If you apply the same rule of thumb here (on the weekly chart), a breakout would constitute placing a take profit PT at $15,057 and a breakdown take profit PT at $5,407.
As mentioned earlier, a breakout in this case is more likely due to the confirmation we see with the earlier article I wrote about. The conversion line still hovering above the base line of the Ichimoku Cloud pattern further strengthens this bullish outlook.
From the start of this triangle is when the 21 SMA crossed over the 50 and eventually the 100. Another confirmation we could use to sustain this 2019 bull run.
The Conclusion
A price breakout from this symmetrical triangle pattern is imminent. The bulls have been on the sidelines since June and are ready to charge ahead to the upside. And of course, don’t forget to put into context and realize what macro environment we are in. BTC and Gold have been on the same trading trajectory (almost close to a 1 to 1 correlation) for the past few months with an inverse relationship with equities (down about 4% since the start of the BTC triangle pattern if we use the SPX as a proxy). Market sentiment has been low along with other economic indicators.
And as we have seen a few months back and still to this day, the yield curve has inverted. The CME’s FedWatch tool is projecting a 95% probability of a 25 basis point rate cut at next month’s FOMC meeting. Plainly this means that a cut in interest rates will weaken the dollar, putting upward pressure on commodities, with BTC being one of them. What could also help the BTC bull run are factors such as the ongoing US-China trade war, which for the most part, doesn’t have an ending site just yet.
Follow me on Twitter @crypto67sauce !
Comment
Triangle Breakdown Confirmation. Look for further price depreciation in the near term.
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