Bitcoin, comparing short squeeze rally with previous ones
Updated
In general, short squeeze rallies are always temporarily. Why? Because they are forced and have no real foundation. For the ones who don't understand what a short squeeze rally is (or a long squeeze which is the opposite direction) it's quite simply:
Bitcoin dumped 1000/1500 points a week ago and was hanging around 7000. As we all know, there are a lot of traders in financial markets. We always have bears and bulls, sometimes more bears than bulls and other way around. But it's never like 90 to 10, but see it as maybe 70/30 in the most extreme. Anyway, so imagine many people shorted Bitcoin after that big drop at 7000/7500. With 7600 and 7800 being very clear resistance levels, you can imagine that there are a lot of stop loss orders above the 7500 for these short positions. Also, you can also assume people who shorted it at 8000/8400 before the drop, were waiting for another wave down, so even more shorts in the market. In my previous analysis i wrote the following:
When the bear flag is real, we should normally not touch the 7600. Usually we see it getting sold below that level (if the resistance is real), so more like 7500/7550
This actually explains the things above. We can't know upfront if it will break resistance or that we make another drop. We can only judge it along the way, based on volume and support/resistances on the lower time frames. You can use indicators and/or patterns or other TA tools to make that call. Everyone uses what suits them the most. But for the less experienced readers, TA is extremely subjective. I have mentioned this a lot of times past 18 months since i am on TV, give me a random chart and i can give you a bullish and bearish analysis that will convince you of the direction that i want to choose for you. This is why TA is so difficult. You can not analyse the same asset continuously without becoming a bit biased along the way. Maybe because of yourself, but from my own experience it's because of the noise in the market. I also used to watch more experienced TA guys in my early years. I would also see the same thing as we are seeing now with Bitcoin at this stage. With some being convinced of crashing again coming period while others are convinced the bull market has started again.
I know that most of the crypto traders are biased in general, it was easy to see in 2018. There were so many people hating me the first half year of 2018 for being extremely bearish. Why, because it did not fit into their dreams of seeing Bitcoin going to 100k or whatever. It was simple pattern i was seeing back then (and now as well but a bit less) which was the following. Each analysis that had 100% or 1000% in the title and rockets or other extreme bullish words, were getting so many likes as if people thought it would help to push the price higher when giving a like. So in other words, you can never be 100% objective when you have crypto assets in your position.
Now don't get me wrong, it's okay to believe in something and actually even good when you do it for the right reasons. You are investing in something for the long term. This is the whole deal to why most mess up, mixing up investing for the long term with trading. If you want to invest for the long term because you believe Bitcoin will go to 100K or 1 mil, than what why would 1k or 5K matter so much now? My advice in this is, you need to make your plan. Either trade the market or invest in the market. You can do both as well, but then have your long term positions in and put them under lock and key and actually even forget about it. Because how conflicting will it be, when you buy Bitcoin at 8.000, but you see a pattern that tells you that we might drop to 4.000. What will you do? Will you sell the long term position as well to buy it back again for half the price? Will you also do a swing short trade to make profit as well. But what if we drop to 6500 and then rally back to 9.000? Wil you buy because of FOMO? Let's say you do and we go to 10.000 even and you are happy you did FOMO. But then it starts to turn again and we drop to 5.000. I can keep on going, but i think almost everyone has been in these spots in 2018 several times. When you mix up strategies, you will get emotionally attached and biased even if you don't want to.
There is a whole lot more to say about this, but will keep that for another time.
Back to the chart, since it's still difficult to say what will happen on the short term and mid-term, i have been comparing this. Since it is clear that the rally from 7300 to 8K was a short squeeze, IMO we need to be very careful wit short term (coming week) bullish outlook. I have one theory in mind and that is the following:
We had record volumes a week ago at the highs, so my best guess is the people who forced the market up sold there. Now after the drop to 7000/6400 they short squeezed it up again to be able to fill up short positions. This is what my gut feeling tells me what is going on. Also have a potential double top with the neckline at 7000. So only objective guidelines i can give for now is, that if we do drop, it can still be turned into a big triangle if the 7400ish can hold as support. The movement of the past 2 days could be seen as a bull flag, but i don't like the shape of it all, also not liking the volume profile of it. If we do see a drop to 7000/7200, than it will become much more likely to see the correction getting extended in the 6K range at least. I wrote something about this 2 days ago in my channels and will post that one as well. The only way i see a real rally happen, if we see a big volume break of 8400. Then not a rally to 8500/8600 and stall again, also not a 1 minute short squeeze to 9K, but a good strong rally withing a few hours to the high 8K levels. Short term, seems that 7800ish is a support level now.
Will try to post more later today, to give a bit more guidelines on the lower time frames.
Please don't forget to like if you appreciate this :)
Previous analysis:
Bitcoin dumped 1000/1500 points a week ago and was hanging around 7000. As we all know, there are a lot of traders in financial markets. We always have bears and bulls, sometimes more bears than bulls and other way around. But it's never like 90 to 10, but see it as maybe 70/30 in the most extreme. Anyway, so imagine many people shorted Bitcoin after that big drop at 7000/7500. With 7600 and 7800 being very clear resistance levels, you can imagine that there are a lot of stop loss orders above the 7500 for these short positions. Also, you can also assume people who shorted it at 8000/8400 before the drop, were waiting for another wave down, so even more shorts in the market. In my previous analysis i wrote the following:
When the bear flag is real, we should normally not touch the 7600. Usually we see it getting sold below that level (if the resistance is real), so more like 7500/7550
This actually explains the things above. We can't know upfront if it will break resistance or that we make another drop. We can only judge it along the way, based on volume and support/resistances on the lower time frames. You can use indicators and/or patterns or other TA tools to make that call. Everyone uses what suits them the most. But for the less experienced readers, TA is extremely subjective. I have mentioned this a lot of times past 18 months since i am on TV, give me a random chart and i can give you a bullish and bearish analysis that will convince you of the direction that i want to choose for you. This is why TA is so difficult. You can not analyse the same asset continuously without becoming a bit biased along the way. Maybe because of yourself, but from my own experience it's because of the noise in the market. I also used to watch more experienced TA guys in my early years. I would also see the same thing as we are seeing now with Bitcoin at this stage. With some being convinced of crashing again coming period while others are convinced the bull market has started again.
I know that most of the crypto traders are biased in general, it was easy to see in 2018. There were so many people hating me the first half year of 2018 for being extremely bearish. Why, because it did not fit into their dreams of seeing Bitcoin going to 100k or whatever. It was simple pattern i was seeing back then (and now as well but a bit less) which was the following. Each analysis that had 100% or 1000% in the title and rockets or other extreme bullish words, were getting so many likes as if people thought it would help to push the price higher when giving a like. So in other words, you can never be 100% objective when you have crypto assets in your position.
Now don't get me wrong, it's okay to believe in something and actually even good when you do it for the right reasons. You are investing in something for the long term. This is the whole deal to why most mess up, mixing up investing for the long term with trading. If you want to invest for the long term because you believe Bitcoin will go to 100K or 1 mil, than what why would 1k or 5K matter so much now? My advice in this is, you need to make your plan. Either trade the market or invest in the market. You can do both as well, but then have your long term positions in and put them under lock and key and actually even forget about it. Because how conflicting will it be, when you buy Bitcoin at 8.000, but you see a pattern that tells you that we might drop to 4.000. What will you do? Will you sell the long term position as well to buy it back again for half the price? Will you also do a swing short trade to make profit as well. But what if we drop to 6500 and then rally back to 9.000? Wil you buy because of FOMO? Let's say you do and we go to 10.000 even and you are happy you did FOMO. But then it starts to turn again and we drop to 5.000. I can keep on going, but i think almost everyone has been in these spots in 2018 several times. When you mix up strategies, you will get emotionally attached and biased even if you don't want to.
There is a whole lot more to say about this, but will keep that for another time.
Back to the chart, since it's still difficult to say what will happen on the short term and mid-term, i have been comparing this. Since it is clear that the rally from 7300 to 8K was a short squeeze, IMO we need to be very careful wit short term (coming week) bullish outlook. I have one theory in mind and that is the following:
We had record volumes a week ago at the highs, so my best guess is the people who forced the market up sold there. Now after the drop to 7000/6400 they short squeezed it up again to be able to fill up short positions. This is what my gut feeling tells me what is going on. Also have a potential double top with the neckline at 7000. So only objective guidelines i can give for now is, that if we do drop, it can still be turned into a big triangle if the 7400ish can hold as support. The movement of the past 2 days could be seen as a bull flag, but i don't like the shape of it all, also not liking the volume profile of it. If we do see a drop to 7000/7200, than it will become much more likely to see the correction getting extended in the 6K range at least. I wrote something about this 2 days ago in my channels and will post that one as well. The only way i see a real rally happen, if we see a big volume break of 8400. Then not a rally to 8500/8600 and stall again, also not a 1 minute short squeeze to 9K, but a good strong rally withing a few hours to the high 8K levels. Short term, seems that 7800ish is a support level now.
Will try to post more later today, to give a bit more guidelines on the lower time frames.
Please don't forget to like if you appreciate this :)
Previous analysis:
Note
As mentioned, i don't like the big bull flag at all in this 7600/8300 range from the past days. There is a chance that it does get turned into a bullish wedge. So if we do see another drop to the 7600ish area, find support and bounce up again like the blue line shows, than i might be a realistic outcome. Target of this possible wedge is not easy, but seems to be around 8400/8600. As described above, only a rally to these levels, won't be enough to create another big rally. On the right, seems we have another curved bottom formation. As we had at the 7200 a few days ago. So this would also be something good to follow on the short term.
Note
New ETH analysis:
Note
For the rest of the alts coins, similar message about that if we want to see a real rally, the breakout needs to be strong and big volume. So a slow push up won't do it, needs to be like the blue lines i have drawn on a few alts. With a few where we can see those type of inverse H&S patterns, that have like a 75% chance of failure, but means they can succeed sometimes. But from my experience, the only times they are successful, the breakout is as described above.
Note
The resistance line of the wedge is not an easy one to place, so can't say if it's still against the resistance or that it broke out already. Thing is, if it broke out already, this breakout is extremely weak and very likely to see it fail and drop.The curved support line is still in play, but since it bounced up already, i think a higher low should be max around the blue zone from now on.
The red resistance, shows a potential stop loss level for short positions. Even if this breaks, it might be an important moment. Because if this stop zone gets used to force shorts to buy back into their own short orders, it could get nasty. They way they usually do it, is with a Bart move. So seeing a quick squeeze up of 50/150 points (with current 8K prices maybe more like 150/300 points), but then getting pushed down again just as fast. Something like the red line. I am glad to say, that these Bart moves have failed a lot past 2 months or so. Since the 3850/4200 range the 2 weeks before the breakout to the 5K zone, it seems it has all changed. We had to endure those manipulative moves for almost a year or so.
I think ETH might be a very good guideline to follow as well. That one is very close to breaking up. Already against a small resistance level. If that one breaks, it could follow through more. We have seen it several times past half year, that ETH sometimes rallied quite big already, even a few minutes before Bitcoin started to even move.
Note
We might have a smaller range to use as a short term guideline. We have tested that blue zone now, so far it has made a 70 and 90 point bounce up, which is not something small. So, if this bear flag is real, it should stay below the 8020. Then if the blue breaks, it could drop much more. I have drawn that thick black support line as well now, since we bounced off that one as well. Because of this test, the longer it stays close to it, the bigger the chances it will break. We had something similar a week ago, where i showed an upwards channel, but eventually it dropped again to the support of that channel. The level that should not get crossed then, is around 8050/80. But i think because of the bear flag, 8020 might bring things to neutral again.
Note
Then we had that small wedge to follow as well, now it's this small bear flag.It was this analysis btw:
Note
Now it is getting a bit easier to determine the levels. Going to put it in a new analysis about this chart. We can see the bear flag got a little bit bigger, but it eventually played out, so far moving in a similar way as a week ago.
Note
New Bitcoin analysis:
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