Over the past few weeks and months I have been bearish BTC. It was foolish to think that the parabolic rise could and would continue unabated forever. Just before BTC tipped 20k there was absolute hysteria! I had all kinds of people come out of the woodwork calling me to ask how they could buy Bitcoin. My answer to them was simple; DON'T! (At least not at that time.)
Now the hottest game in town is trying to pick the bottom and the beginning of the next super bull cycle for Bitcoin. A few attempts have been made at 10k, 7.5k and now more recently, 6k.
Although we hit the , the bounce hasn't shown me that sentiment has completely flipped bullish. If it had, we would of rocketed past 9k before being rejected briefly at 10k, only to go on and break it without too much hesitation.
However, looking at the chart above, there is an obvious rising wedge which wasn't able to break above the 0.786 fib of the previous swing low. If we look , I outlined a very similar pattern; a rising wedge morphing into a bear pennant. This also couldn't make it above the 0.786 fib from it's prior swing low.
Past behavior is the best predictor of the future; which is why fractals occur so often within charts.
Let's keep an eye on:
test of the pennant bottom: 7.4k
rejection at the larger trend line: 7.8k
re-test of prior low: 6k
If 6k fails to hold, a test of the weekly 50MA @ 5.3k
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We bounced from the 0.5 "fib" from the previous swing high at 7.8k, and briefly held at the 0.618 fib, before it turned into resistance.
I'm still waiting for the test of the 0.382 fib (7.4k) and a retest of the 0.5 fib (7.8k).
The CCI has flipped sell on the 1hr, so we will see if that is sustained over the next 4-8hrs.
I've updated the chart below:
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We have, for now, broken the larger descending wedge and the 0.618 fib again.
This doesn't mean the bearish idea is invalidated just yet. If it manages to break above the pennant, and find support at 9k, then there is a greater probability that we go to 10k.
For now, I'll be watching the top of the pennant closely. Let's reevaluate in a few hours time.
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It's always helpful to take a step back and look at the higher timeframes. I've outlined some possible price pathways below:
You may think that it is lame to list every possible price movement because I can say "see....I said this would happen"; but in reality this is what a trader must do so as not to be caught by surprise.
Know when you are right, but more importantly, know when you are wrong!
I still believe the red (down) pathway has the highest probability of completing given the entire setup; the fractals, the trend lines, the fibs etc. Then the fake breakout as my 2nd choice, and finally a legitimate bullish breakout as the least likely.
Comments and suggestions are always welcome.
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One final post before I call it a night (Im in Australia, so it's bed time for me).
This is fast becoming one of my favorite indicators; the Bitfinex longs vs price.
Historically the red dashed lined indicated a saturation point that when crossed would see a correction in price. This is presumably because of something known as a long squeeze; where price is being bolstered by margin longs, which when closed, drive price lower if the books on the buy side are thin. This in turn "squeezes" the next person to consider closing due to either shrinking profits, or increasing losses. This snowballs rapidly!
I first came across this phenomenon in my idea here, which predicted the close of longs and the price dump:
However, since then, and a local bottom of 6k, the number of longs has stayed above the historical saturation point of 31k (or ~$248,000,000 USD worth of BTC). This is concerning because any time the price declines rapidly due to some bad news etc, we will see a long squeeze that will exacerbate the downward price momentum.
I've highlighted a few interesting areas on this chart:
1. A very quick long squeeze where ~8k BTC longs were closed within ~15m -- a 25% decline. The price decline was roughly 7% in that same period. To be honest, I expected a bigger impact than that to the price. 2. Despite the price declining by ~28%, longs increased by ~48% (or 11k longs). This is extremely divergent. You would expect to see some longs opening trying to pick the bottom, but for so many longs to continue to open while price was still declining so rapidly is odd to say the least. 3. Another example of divergent longs vs price, where price declined by ~10% and longs increased by ~17% (5k longs). 4. This is an example where price and the number of longs are positively correlated. It's not easy to tell if this is causal or merely a reaction to increasing price. ie. Did the opening of 2k longs lead to the increase of price by ~10%? Or vice versa?
I'm not sure what to think about these patterns right now; is it a single large entity that is using margin longs to either prevent BTC from falling further (and ultimately trying to pump the price) -- OR -- is it just herd behavior?
I'd love to hear your thoughts on this.
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An update from my previous big picture view:
We tested the upper resistance at 9k once again. And we were once again rejected. I removed all the other labels and lines to clean things up a bit, and left just the price path I think is still most likely.
What I have also done is added the Stoch RSI and marked out other points when it crossed into overbought on the daily, which promptly resulted in big sell offs.
Lets keep an eye on the key price points I outlined in the OP
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We are approaching a death cross in the next couple of days; the 20MA crossing the 200MA.
I'll post tomorrow recapping all the ideas and updates above.
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We still haven't broken down, which is somewhat of a surprise given everything that has been outlined so far. Here's a recap of the last couple of days:
* 4hr 100 MA has been historical resistance. * Stoch RSI on the daily is overbought * The 4hr Stoch RSI was overbought and the 1hr is now. * A large number of longs are open on bitfinex. * The failed breakout of 9k. * Rising wedge / Bear flag pattern
Right now we are at a pivot point; do we break the long running 100 MA resistance and the larger falling wedge, or do we cave once more to selling pressure?
Probably 1 more day until we can be really confident to call either way.
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As I noted above, we are at a critical point right now.
This is looking likely that it will break over 9k, but holding the level is key for a sustained push to 10k and above. It's a really close call.
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So about 2mins after I posted the above comment, we broke above 9k with some significant volume; and to my surprise, actually a decrease in margin longs. So this means it was a vanilla fuelled breakout, and that longs were maxed out.
As I said above, holding 9k is essential.
I'm going to cancel this trade idea since we broke above 9k in a fashion that I think will see it go higher.
Before celebrating to fast that we have now gone full bull; just keep in mind that 10k is a key level. Not only did we spend significant time leaning on it on the way down, it is big round psychological number. There is still potential for a rejection there, and another big sell off. I'll lob this in here like a grenade before I head off to bed ;)
100MA on the 4hr has acted as a very strong resistance.
BTC has rallied to and failed against it 6 times now on 10th, 13th, 15th and 28th Jan and again in the last 12 hours as it failed at 9000.
Descending volume and lots of holidays from this week onwards, including CNY (is this historically reflected in crypto?) may be the straw that breaks the camel to help BTC on the way to retesting 6000.
I´m still bearish on BTC- very much enjoying your analysis and hoping you are correct so there is another buy opp at the bottom, after which we may move into more positive territory in BTC
That was a great spot re; the 4hr 100MA! Combine that with the Stoch RSI being overbought on the 4hr and daily, and it doesn't look like it has a chance of breaking the down trend over the next few days. I'm looking forward to it also!
ADW001
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@crimsonr, I cant take credit! Someone mentioned it on a live video I watched this morning so I checked for myself.
@ADW001, haha... yeah that was me that asked. I was talking about the daily 100.... but she had the 4hr on. It was a happy accident! ;)
ADW001
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@crimsonr, I was interested as never seen anyone use the 100MA on that group but it definitely lines up. But it is cause or is it effect??! Thats the question. The trouble I guess is that if you look at enough indicators to fit a pattern you think is there, you´ll likely find one.
Or at least thats what happens when I am looking for something to fit my own narrative of what I want to happen! And right now I want to see it tank!
crimsonronin
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@ADW001, Pareidolia is a problem we all suffer from. For instance, every person and their dog was watching the inverse h&s unfold because most people want a BTC bull market like Nov-Dec. And because they are so blinded by their hope of a bull, they miss the potential for it to be a bear flag, bear pennant or rising wedge. I'm not immune from this either, which is why I try to look at a lot of other TA to make sure I haven't missed anything.
20, 50, 100 and 200 MAs are most commonly used; but the ubiquity means it starts to become a self fulfilling prophecy ie. the more people that use them and trade off them, the more it will reinforce the pattern. So as you said, is it cause or effect....
The tools I use the most now are: MAs, TD (for timing), RSI, fibs and patterns. I haven't found the CCI to be all that useful at the 4hr yet. I lags too much.
darkandblue
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give it up mate, it didn't go your way this time.could have but didn't. as a follower, I feel like you are not reading BTC chart now but moving with your current bearish sentiment. The inverted Head and shoulders formed and confirmed, now it is highly likely that we will follow that pattern. It might very well fall again from there back to 3-4k level but for now we are going up to 12k-14k range.
crimsonronin
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@retiringsoon1, Thanks for the comment.
haha yep. As I said earlier: gotta know when you are wrong more than you have to know when you are right.
I cancelled the trade for a reason; the original pattern was invalidated.
The last chart isn't a serious contender unless those levels are rejected. But once we clear the 10k barrier and hold it, I will look for a long entry.
BTC has rallied to and failed against it 6 times now on 10th, 13th, 15th and 28th Jan and again in the last 12 hours as it failed at 9000.
Descending volume and lots of holidays from this week onwards, including CNY (is this historically reflected in crypto?) may be the straw that breaks the camel to help BTC on the way to retesting 6000.
I´m still bearish on BTC- very much enjoying your analysis and hoping you are correct so there is another buy opp at the bottom, after which we may move into more positive territory in BTC