BTC/USD: 2 Probable Scenarios in a Zone of No Resistance
Updated
In this analysis, I will be providing two of my most probable scenarios for Bitcoin's trajectory for the short/mid term.
This is not investment advice. This is for educational and entertainment purposes only. I am not responsible for the profits or loss generated from your investments. Trade and invest at your own risk.
Weekly Chart Analysis
- Taking a look at the weekly, it might be confusing as to what you need to refer to for key areas of resistance, as we have claimed new historical highs
- I have been talking about the accuracy of the Fibonacci retracement as a tool to identify new resistance zones, especially using the 1.618, 2.618, 3.618, and 4.618 ratios.
- By drawing looking at the Fibonacci ratios for the past two cycles, we can see that the ratios align:
- Support being at 19.6-20k, and resistance at 29.9-30.2k
- Based on these references, we are currently located almost right at the middle, making it difficult for traders to open new positions.
- The trend is too bullish to short, but the technical indicators are too bearish to long.
- The Relative Strength Index (RSI) is extremely overextended, and located on the overbought territories.
- While we have historically had a 30-40% correction every time the RSI topped out on the weekly at overbought zones, there's no guarantee that the RSI won't extend further
- Trying to short the absolute top based on the RSI is equivalent to catching falling knives.
- The Moving Average Convergence Divergence (MACD) continues to show increasing histograms as a sign of strength.
- The momentum on this bullish trend is extremely strong.
- As such, my first and more probable case for Bitcoin is that we see prices touch 30k regions first.
- The market will be euphoric, and the masses won't realize that we've topped out for a serious correction down to 19-20k regions.
- A correction from 30k to 19k is about 34%, which aligns with past historical corrections as well.
- Another case is if we see Bitcoin correct down to 19k first, which would indicate that we'd move onto 30k regions without having to worry too much about another severe drop.
Daily Chart Analysis
- The daily chart is the supporting evidence behind a case for a correction down to 19k before we move onto 30k.
- Based on the Wyckoffian theory of supply and demand, we can see that Bitcoin has undergone clear phases of accumulation, re-accumulation, and distribution.
- Considering the cycle and the low sell volume, it's likely that this sideways motion could end up being a distribution phase before we break down to 19k regions.
4 Hour Chart Analysis
- However, the 4 hour chart suggests otherwise.
-
- We can count Elliott Waves to see where Bitcoin is at for now.
- Bitcoin had a textbook Elliott Impulse Wave (12345) leading up
- It is currently consolidating within a triangle pattern, in which we can count Elliott Triangle Waves (ABCDE)
- The RSI has broken out of resistance
- The MACD shows decreasing bearish histograms, and a potential golden cross is in play.
- Based on the Fibonacci retracement ratios on the 4H as well, we can see that 3.618 targets 30.7k
- Key areas of resistance are at 24.3k, 25.8k, and 28.2k
Conclusion
While there are two most probable scenarios in which Bitcoin's price action could unfold, I believe that the first case has a higher probability of playing out. Nonetheless, it's always important to remember that the market cannot be predicted by anyone. What we can merely do is identify key areas of interest, and trade by levels, based on probabilities.
If you like this educational post, please make sure to like, and follow for more quality content!
If you have any questions or comments, feel free to comment below! :)
This is not investment advice. This is for educational and entertainment purposes only. I am not responsible for the profits or loss generated from your investments. Trade and invest at your own risk.
Weekly Chart Analysis
- Taking a look at the weekly, it might be confusing as to what you need to refer to for key areas of resistance, as we have claimed new historical highs
- I have been talking about the accuracy of the Fibonacci retracement as a tool to identify new resistance zones, especially using the 1.618, 2.618, 3.618, and 4.618 ratios.
- By drawing looking at the Fibonacci ratios for the past two cycles, we can see that the ratios align:
- Support being at 19.6-20k, and resistance at 29.9-30.2k
- Based on these references, we are currently located almost right at the middle, making it difficult for traders to open new positions.
- The trend is too bullish to short, but the technical indicators are too bearish to long.
- The Relative Strength Index (RSI) is extremely overextended, and located on the overbought territories.
- While we have historically had a 30-40% correction every time the RSI topped out on the weekly at overbought zones, there's no guarantee that the RSI won't extend further
- Trying to short the absolute top based on the RSI is equivalent to catching falling knives.
- The Moving Average Convergence Divergence (MACD) continues to show increasing histograms as a sign of strength.
- The momentum on this bullish trend is extremely strong.
- As such, my first and more probable case for Bitcoin is that we see prices touch 30k regions first.
- The market will be euphoric, and the masses won't realize that we've topped out for a serious correction down to 19-20k regions.
- A correction from 30k to 19k is about 34%, which aligns with past historical corrections as well.
- Another case is if we see Bitcoin correct down to 19k first, which would indicate that we'd move onto 30k regions without having to worry too much about another severe drop.
Daily Chart Analysis
- The daily chart is the supporting evidence behind a case for a correction down to 19k before we move onto 30k.
- Based on the Wyckoffian theory of supply and demand, we can see that Bitcoin has undergone clear phases of accumulation, re-accumulation, and distribution.
- Considering the cycle and the low sell volume, it's likely that this sideways motion could end up being a distribution phase before we break down to 19k regions.
4 Hour Chart Analysis
- However, the 4 hour chart suggests otherwise.
-
- We can count Elliott Waves to see where Bitcoin is at for now.
- Bitcoin had a textbook Elliott Impulse Wave (12345) leading up
- It is currently consolidating within a triangle pattern, in which we can count Elliott Triangle Waves (ABCDE)
- The RSI has broken out of resistance
- The MACD shows decreasing bearish histograms, and a potential golden cross is in play.
- Based on the Fibonacci retracement ratios on the 4H as well, we can see that 3.618 targets 30.7k
- Key areas of resistance are at 24.3k, 25.8k, and 28.2k
Conclusion
While there are two most probable scenarios in which Bitcoin's price action could unfold, I believe that the first case has a higher probability of playing out. Nonetheless, it's always important to remember that the market cannot be predicted by anyone. What we can merely do is identify key areas of interest, and trade by levels, based on probabilities.
If you like this educational post, please make sure to like, and follow for more quality content!
If you have any questions or comments, feel free to comment below! :)
Note
You can also check out my long term breakout projection by clicking the chart above!
🔴 Premium Newsletter: mikebwang.com/newsletter
🟢 TA Education: mikebwang.com/tacourse
🟡 Community: mikebwang.com/theinsiders
🟣 YouTube: youtube.com/investingwithmike
🔵 Twitter: @michael_b_wang
🟢 TA Education: mikebwang.com/tacourse
🟡 Community: mikebwang.com/theinsiders
🟣 YouTube: youtube.com/investingwithmike
🔵 Twitter: @michael_b_wang
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.