ChainLink vs Bitcoin - Bull Flag Giving 25-30%+ Profit PotentialJust for fun, let’s now have a look at ChainLink (LINK) vs Bitcoin (BTC) on the daily log chart.
Back on 9th of April we broke out of the black dashed downtrend channel we had been stuck in for a while. In regards to our moving averages, the 50 EMA is currently crossed bullish over the 200 EMA. The EMA 50 has also been providing some support since the 15th of April, which we re-tested several times. On the 25th and 26th we did however break to the downside of this support for a test of the 200 EMA (which held); and we are currently trading back above the 50 EMA, opening well above it today.
As you can see, in some bullish news we have been forming a bull flag since the start of April; and we are currently testing the resistance of the top of the flag. You may have noticed that I have added a target that is just shorter than the length of the flag pole. The reason being, is that the flag pole height would take us to a point just above the heavy resistance identified in red. Given that this is heavy resistance that hasn’t been tested in a while; and I like to err on the side of caution – I have set my target just below this. This still gives us between 25-30% profits depending on exactly where you exit.
So when can we expect a break out of the flag itself? Well there are a few things to consider. Firstly, given that the 50 EMA is currently coinciding with the 23.6% Fib level; and we have had both a mixture of both support and resistance at the 23.6% Fib since Feb - it’s almost a 50/50 shot of whether it will hold in the immediate short term. So let’s have a look at our other indicators and see if they give us some more clarity.
Volume has dropped off today, so this is a sign that we could find resistance at the top of the flag where we currently find ourselves. All these buyers over the past couple weeks are not going to want to see yet, so finding resistance here just means we will form a slightly longer flag length.
Despite the bullish crossover that occurred on the MACD on the 25th of April, there is really no momentum behind this. It also appears we are about to cross back below the signal line, which suggests a retrace from the top of the flag.
RSI is at 51 and has been around the 50 level over the past 5 days. This gives us a 50/50 chance of which way we will go, however based on the MACD and dropping volume, I would say a retrace is again likely.
Aroon Down is below 50 and Aroon Up is above 50 – indicating bears have an edge here; further supporting a retrace. It is worth noting the Aroon Down is falling, so it won’t be long before it’s down where we want it to be in preparation for the run up to our target.
Having a glance at the half hour chart, we have an emerging advance block bearish candlestick pattern – again supporting a retrace.
In summary I am bullish on this. I think in the immediate term we will see a retrace from the resistance found at the top of the flag (though this is not guaranteed as a lot of our indicators are fairly neutral and could go either way – albeit they are hinting slightly more towards a retrace). In terms of entry points you have two options. The first is on confirmed break out of the flag itself. The second is where I have added the green buy zone and is just above the top of the flag. This is the less risky of the options and the one I tend to personally take. A stop loss can be added just below the bottom of the flag itself (just remember to shift it progressively upwards once we have a confirmed trade in progress!).
Cheers
