Is Bitcoin Planning a Reversal for Monday Morning?
There's a lot going on in this chart. Let me take you through it step by step. I will follow the standard procedure for particularly congested charts by working through the annotations with a series of Analysis Points (APs), with concluding remarks at the end. Let's get into it:
AP1) Firstly, consider the green solid diagonal line which projects downwards from the high labelled F. This is a simple trendline drawn by connecting the high at F with the interim high which occurred a few candles ago. This trendline has been tested twice. It hasn't been validated by a third retest and reversal yet, but it has potential to act as a price barrier in the future.
AP2) AP2 considers the red trendlines, which are constructed differently from the trendline in AP1. It is based on the concept of angular symmetry, a tool I often write about. Firstly, a trendline is drawn by connecting the highs at D and F. This is the higher red trendline. This line represents a 'baseline' angle of ascent this market is working from. We can suppose that the same angle will be used when projected from other similarly significant points. When that line is copied exactly (keeping the angle exactly the same) and projected from the low at A, it intersects the green trendline from AP1 in the cyan circle. This is a point in the future, for which we have no price data yet.
AP3) This next point connects both AP1 and AP2. Observe the result of dividing the price range from E to F into Fibonacci ratios. The 1.618 extension level cuts through almost exactly the point in the cyan circle where the trendlines from AP1 and AP2 intersect. This makes the intersection much more interesting. It is very typical of markets for a retracement to find support (or resistance) at the 1.618 extension of the final swing from the previous trend. Notice how the swing from E to F is the final swing of the previous trend. The 1.618 extension of this range is a good potential support target.
AP4) Now, the big green boxes you've probably been wondering about. The first two boxes were drawn to enclose the two major secondary uptrends in the trend from A to F. That is, they are the most powerful trending phases. The boxes are used to represent the price excursion of these trending phases. You'll notice that the heights of these two boxes are very similar. They're not side by side for easy comparison, but trust that they are relatively close. Now, the third box is actually a copy of the height of the second box. That is, the same price difference. It is projected from the high at F such that the top of the box aligns with the high, F. Clearly, the bottom of the box maps onto the horizontal level obtained from Fibonacci analysis in AP3. This proportion gives extra credibility to this level. Of course, the market has actually already retraced as low as this horizontal level and since reversed. We're looking at the potential for the market to return, probably going slightly lower to make a lower absolute low, but then reversing again from the cyan circle, this time a more powerful reversal.
AP5) Finally, let's look at the time element. For the purpose of this AP, assume that the market does come down as far as the cyan circle and makes a low. Making a low exactly on the intersection would be 152 hours since the low at A. That is, from the start of the rally to the end of the retracement would have lasted for 152 candles. This is shown by the vertical purple dashed lines. Now look at how those 152 hours were split into the rally section and the retracement section. 102 hours were spent in the rally, and 51 hours spent in the retracement (hypothetically!), with the candle at the high at F counted twice. That means the rally is exactly twice as long as the retracement. This is essentially a 50% time retracement.
The confluence of all of these APs validates the cyan circle as a potentially extremely strong price and time barrier. If the market does come down to it, there is a very good chance of a reversal. If the market does not, each individual AP still stands (apart from the time which will have past) so keep an eye on these potential barriers. There will be other clusters to come, but this is the most likely one to be watching right now.
AP1) Firstly, consider the green solid diagonal line which projects downwards from the high labelled F. This is a simple trendline drawn by connecting the high at F with the interim high which occurred a few candles ago. This trendline has been tested twice. It hasn't been validated by a third retest and reversal yet, but it has potential to act as a price barrier in the future.
AP2) AP2 considers the red trendlines, which are constructed differently from the trendline in AP1. It is based on the concept of angular symmetry, a tool I often write about. Firstly, a trendline is drawn by connecting the highs at D and F. This is the higher red trendline. This line represents a 'baseline' angle of ascent this market is working from. We can suppose that the same angle will be used when projected from other similarly significant points. When that line is copied exactly (keeping the angle exactly the same) and projected from the low at A, it intersects the green trendline from AP1 in the cyan circle. This is a point in the future, for which we have no price data yet.
AP3) This next point connects both AP1 and AP2. Observe the result of dividing the price range from E to F into Fibonacci ratios. The 1.618 extension level cuts through almost exactly the point in the cyan circle where the trendlines from AP1 and AP2 intersect. This makes the intersection much more interesting. It is very typical of markets for a retracement to find support (or resistance) at the 1.618 extension of the final swing from the previous trend. Notice how the swing from E to F is the final swing of the previous trend. The 1.618 extension of this range is a good potential support target.
AP4) Now, the big green boxes you've probably been wondering about. The first two boxes were drawn to enclose the two major secondary uptrends in the trend from A to F. That is, they are the most powerful trending phases. The boxes are used to represent the price excursion of these trending phases. You'll notice that the heights of these two boxes are very similar. They're not side by side for easy comparison, but trust that they are relatively close. Now, the third box is actually a copy of the height of the second box. That is, the same price difference. It is projected from the high at F such that the top of the box aligns with the high, F. Clearly, the bottom of the box maps onto the horizontal level obtained from Fibonacci analysis in AP3. This proportion gives extra credibility to this level. Of course, the market has actually already retraced as low as this horizontal level and since reversed. We're looking at the potential for the market to return, probably going slightly lower to make a lower absolute low, but then reversing again from the cyan circle, this time a more powerful reversal.
AP5) Finally, let's look at the time element. For the purpose of this AP, assume that the market does come down as far as the cyan circle and makes a low. Making a low exactly on the intersection would be 152 hours since the low at A. That is, from the start of the rally to the end of the retracement would have lasted for 152 candles. This is shown by the vertical purple dashed lines. Now look at how those 152 hours were split into the rally section and the retracement section. 102 hours were spent in the rally, and 51 hours spent in the retracement (hypothetically!), with the candle at the high at F counted twice. That means the rally is exactly twice as long as the retracement. This is essentially a 50% time retracement.
The confluence of all of these APs validates the cyan circle as a potentially extremely strong price and time barrier. If the market does come down to it, there is a very good chance of a reversal. If the market does not, each individual AP still stands (apart from the time which will have past) so keep an eye on these potential barriers. There will be other clusters to come, but this is the most likely one to be watching right now.
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