Bitcoin: 105K Greater Chance Of Retrace.Bitcoin briefly tested 90K only to show a sharp reversal which has lead to a run into the 105K area resistance. IF momentum continues, 108K can be tested, but IF a bearish reversal appears, a test of 100K is also possible. The key is looking for confirmations on smaller time frames in order to get a better sense of what the market wants to do, not what you think it will do. There is also an important lesson here about chart patterns.
First let's address the wave count. My chart shows a "5?" which is potentially the completion of a very broad (monthly) Wave 3. The reason there is a "?" is because in order to confirm, the market needs to do something like clear a major support like 90K. While 89K was actually tested, the swift rejection means 90K is still intact and still the major support area to watch for. This also means the current wave structure going back to the 108K high may still be a Wave 4 and a bullish Wave 5 maybe be developing. 108K will have to be cleared in order to confirm. If this scenario plays out, 113K is the next resistance and profit objective area.
The arrow on the chart points to the 105K AREA resistance. From such a level, I anticipate a brief retrace at least (see illustration) over the coming week which can take price back to 100K. Best way to utilize this information is avoid new longs, look to lock in profits, and/or look for trade ideas on smaller time frames. At the moment there are no bearish signs at all so selling in front of such strong momentum is just as risky as buying and expecting a test of 108K.
The other key lesson here is the head and shoulders pattern. I specifically mentioned this in my previous article. These patterns can appear randomly just like anything else. Jumping to a conclusion upon seeing a such a pattern is what gets you caught on the wrong side of the market when you have moves like the one that is in progress now. Best way to avoid this bias is to always keep an open mind and do NOT think in absolutes. The head and shoulders in this case was totally meaningless. The confirmation would have been a decisive break of 90K, NOT a brief break, followed by a bullish pin bar.
Watch price levels and price structure and let the market choose, our job is to adjust to the market and measure the ever evolving risk. At resistance levels like price is at now, I believe probability favors a retrace. I can be wrong, but if the risk on both sides is high, its better to be wrong and out, than wrong and in.
Thank you for considering my analysis and perspective.
