Short

Updated

Bat Advanced Formation setting up - BTCUSD

Bitcoin is setting up for a short opportunity as it approaches an area of resistance formed by the confluence of several fibonacci retrace levels, several moving averages on different time frames, a region of high volume on the price-by-volume chart, and the Potential Reversal Zone of the Bat Advanced Formation. Additionally, there is a bearish divergence on the CMF which provides an additional sign of reversal.

Pattern may reverse anywhere between the 88.6% retracement of XA and the Stop loss level, however below $6,800 is the most likely zone to reverse due to a confluence of the following points of resistance:

1.) The 0.236 retrace of 5.7k up to 10k
2.) The 0.5 retrace of 5.7k up to 7.7k
3.) The 800MA on 1h, 400MA on 2hr, and 200MA on 4hr
4.) Volume Profile shows this region had the highest amount of trading volume dating back to March (Point of Control)
5.) Bearish Divergence on CMF

- Targets for pattern (in green) are defined by the 0.382 and 0.618 retracements of the AD leg, at ~$6,125 and ~$6350, respectfully.
- Stop loss (in red) is at the 1.13 extension of XA, around ~$7,000.

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Note

Notice the Point of Control on the Volume Profile tool is right at the 6,700 price range. This zone has the highest trading volume since March. Also take note of the 200 Moving Average approaching on the 4hr time frame (in blue). This 200MA as well as the other moving averages noted above are all on a direct path to this potential reversal region.

Note

Just a general observation: the last jump up moved 5% compared to the first move of around 10%. If this next jump moves up half the amount of the previous jump again, we should expect price to reach the PRZ and then drop.

Note

Price is currently re-testing the 89EMA (magenta line) and the .382 Fib retrace as resistance after finally breaking down both earlier. As long as price stays below these, we should see a drop to at least the 1st target by tomorrow.

Note

This drop is taking a bit longer than I expected to reach the green targets, but my plan remains the same. Price is still staying confined within this rising wedge, so let’s wait to see which direction it breaks out of the wedge. As I’ve said before, as long as price stays under 7,000 (stop loss level) I still maintain my bearish outlook with the 6,800 range being the toughest resistance level to pass.

Trade active

Note

This idea is still in play! It's just taking a little bit longer to drop out from Point D, but the 6,800 level is still acting as very strong resistance. In the snapshot below, I have updated the green targets with Point D now established. We are still within this rising wedge, so a break out of the wedge will be our first bearish signal. Price is still unable to surpass the 0.5 fib and the 0.236 fib levels.

Also note below on the indicators there are several bearish divergences on the 4 hour time frame on the RSI, MACD, and CMF.

Another thing to note here that a lot of people seem to ignore, is the fact that after price broke below our strong support level around 8,600 on June 12 and continued to drop until June 28. This entire bullish move since then is simply a re-test of that support as resistance now. This doesn't imply that this strong resistance cannot be broken, but until we do break it this "rally" is nothing more than a re-test of resistance. Also note on the chart below the diminishing volume, which signals an overall weakening of this entire move up.

Note

Target 1 has been reached! We finally got the drop that I have been anticipating for a week now and the price just flew right past the 0.382 green target. Right now it is finding support at the 400MA (in dark blue), but I don’t think it will hold and the next green target for this harmonic is at the 0.618 fib level below.

I’ve had some people asking me where to go long, but the thing you need to understand about harmonic patterns is these green targets are simply price levels to close out your short position, they are not levels to go long from. With that said, I personally do not believe either target will hold up very well for a long position and so I am not taking that risk. I am a swing trader so I was only going to go long if the major resistance area (6,800) was broken to the upside, now I will wait for price to fall to deeper levels and find a stronger support area to go long.

For now, let’s keep our eye on the 0.618 green target and see if there is an opportunity for price to stabilize there.

Note

Update: Price is consolidating after breaking past the first green target for the harmonic pattern. Currently this consolidation region is just underneath the 400MA (in blue). This structure resembles a bearish pennant so if price cannot break above the 400MA, the most likely direction is down towards the 2nd green target with the .236 fib level providing first level of support.

Note

Perfect breakdown of the bearish pennant that I pointed out yesterday!

Trade closed: target reached

Both targets have been reached! Price is now sitting on the .618 fib level (2nd target) for this short call. Now that this idea has concluded, I will have to wait and for clearer signals as to where the price will go from here. I will have a new idea hopefully within the next few days!

tommyf1001

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tommyf1001