BTC may be forming an Adam and Eve, but don't trust it yet!

Updated

First let me lead this by saying that I am still a bitcoin bear. The trend is your friend, and the trend is down. Until we have confirmation of reversal, traders should be extremely wary of taking on long positions, especially with such low volume on most major exchanges.

With that out of the way, it's also important to begin paying attention to possible reversal signals. Looking at BTC we can see a fairly obvious "Adam and Eve" formation showing on the charts. For those unfamiliar, an Adam and Eve is a type of double-bottom where the second bottom is much flatter than the first. This formation generally means both sellers and buyers are much weaker than at the previous bottom, and a small amount of good news / positive sentiment can push prices up.

For confirmation we need to see a break of 12K. Of course, this is quite delayed, and as traders we want to enter much earlier.

The earliest possible confirmation would be a break of the long-term descending trendline. You may note that I haven't drawn this "perfectly" - trendlines should be treated more like trend areas. My trend "area" is drawn to be parallel with the lower supporting trend "area." Either way you draw your lines, this would occur around the $7,800-$8,000 price range, depending on the length of time in which these moves occur.
The next major price level would be $9,200, a level we have historically struggled with.
While 10K may be a significant psychological price level, I do not find it very significant from a chart perspective. I believe if we break $9,200 and hold above it, $10,000 would fall shortly thereafter.
lastly we have the major 12K level would would confirm the formation and bull market.

To reiterate, in no way shape or form am I expecting this A&E formation to play out. However, it is important as a trader to recognize its possibility and be prepared to respond accordingly. If price begins rising out of the "eve" bullishly we must reassess our bearish point-of-view. A trader who cannot change perspectives or recognize trend reversals is dead in the water.

Finally, you may have noticed I switched to bars over candles. I've recently begun preferring them for cryptocurrencies over candles due to the fact that the market never closes and bars remove a great deal of "chatter." I still prefer candles for stocks, due to gaps and the nature of stock market trading. Either way, price-action is price-action - use what you like!

Note

Good morning everyone! As you can see, BTC has bulled nicely. However, this entire bull run happened very quickly, and was quite obviously a giant short-squeeze. Looking at our 4H chart (in candle mode again, I prefer bars on the daily only) You can see we are still struggling with our resistance "trendarea" and area. Until we are able to break through this resistance and HOLD ABOVE IT on a significant timeframe (4H +) bullishness is not confirmed - just a very manipulated market.

Lastly, you can see during previous bear cycles we have routinely fallen through price point "X" only to later recover slightly above it before crashing again. There is absolutely no reason why this isn't playing out right now. I have circled examples of this in... cyan?

As always, trade cautiously.

Disclosure: Not financial advice.
Disclosure 2: Currently neutral in this market

Note

BTC just had a rather large red candle. This was mostly expected - even if we are witnessing a trend reversal, a pullback anywhere between 7200 and 7600 should be expected. A collapse through 7200 would be extremely bearish.

It will be important to watch these support levels as well as buying volume when they are reached. Strong buying volume would add to confirmation of trend reversal. In order to truly confirm trend reversal we need to see a break above $9,200, however a rejection of the $7,200-7,600 and a rebreak of the $8,200 level would likely be enough to trigger a long entry, depending on timeframe and other factors we cannot currently calculate.

It's also always a good idea to keep the log chart in mind, as its commonly used. Here it is below. Note that the descending trendline has been fairly accurate, and a break of this trendline (time-dependent) bullishly would also align with the $8,200-$8,500 level, assuming it takes a few days, and adds strength to the reversal signal.

So, in summation, right now as traders we should be neutral in this market, or if you are a day trader you should only be looking at short entries. A long entry would only be justified on a rebreak of previous highs to help confirm the A&E pattern, as well as the descending logarithmic trendline.

As always, trade without emotion and never risk more than you are willing to lose.

Note

Another quick update. Since nothing much has changed since yesterday, traders often get a bit itchy and impatient. Remember - patience is what makes you money as a trader.. and, ironically, a lack of greed.

BTC failed to re-pierce significant resistance at 8250 and is showing a variety of bearish divergences. We can expect a move down to the high 7000s support level (7600-7800). It will be important to watch these levels for confirmation of any potential reversal into a long-term bull trend. Will these levels hold, or will we simply consolidate for another huge dump? No one knows, which is why we must wait!

As always, trade responsibly.

Note

Short update today, and a lesson in patience.

Looking at the daily chart (on binance / USDT, bitfinex charts seem to be down for now) we can see a hidden bearish divergence.

At a minimum I will be waiting for a retest of the 8400 level before considering any sort of long entry into the market.

Trade active

A little late on this update - yesterday was a busy day for me.

BTC has broken its logarithmic downtrend line. The only test remaining, in my opinion, is the 9.2K resistance. After that there's no reason not to go full bull - 10K, in my opinion, will fall easily if 9.2K falls.

My long entry was triggered as BTC was trending up out of its 8.0-8.4 consolidation range, a fractal from previous ranges. While we still haven't gone full bull, the fractal from previous trading ranges indicated we would at least test the logarithmic downtrend line and $9,2. Buy price was around 8350 and change.

Stop is now at $8,600. I want to give BTC plenty of room to play here, since it hasn't attacked $9,2 yet and will likely consolidate prior to a move in either direction. Finally, It could be argued that our failure to reach 9,2 earlier was bearish, but I feel we were simply overextended from our previous run up, and that wasn't the true test. I believe one more attempt will be made.

As always, trade responsibly!

Trade active

Market cap alone tells the true story. BTC is rising, yes - but alts are rising too. The market cap at 9.3K is much greater than the market cap at 12K was.

I would be surprised if we break through 10K on the first go. We will likely consolidate below it for some time, assuming continued bullishness. Given the volatility of BTC, one should allow it some room to play here, but I have begun moving money into alts.

When making alt plays, it's incredibly important to remain patient. Alts are even more volatile than BTC, so one must zoom out and ignore the noise.

Note

10K is a major psychological barrier. I still believe it will fall, but we could get a delayed second wave down here to the high 8,000s. Regardless, I believe we are now in a bull market and strategies should be adjusted to match. It will, of course, be important to watch volume on any impulse move down. We are currently in a "no-trade" zone, unless you just like gambling.

calcie

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.