Bitcoin's volatility contraction... Big move charging up!

26 thg 3, 2018

Let's have a look at this bitcoin analysis on the Coinbase 12hr chart. I normally review Bitfinex and Bithumb charts but find that Coinbase provides a good indication of retail trader activity and chart patterns often resolve more clearly.

As we move towards the end of March, Bitcoin's volatility is clearly decreasing as the market charges up in anticipation of a move towards previous highs, or failure which would see us looking for support below 6k levels. On the positive side, we've just seen our first higher low (18th March) - a key level to observe for buying (if it holds) or shorting (if it fails).

Bulls are currently treading carefully, apprehensive to take control as they're well aware of the bearish sentiment still dominant in the market. I'm hearing many trader's view that April and May will see the return of the bulls and potentially new highs for Bitcoin. Are we heading into an accumulation zone now? I'm reserving judgement to watch how this volatility contraction resolves.

Coinbase trading volume significantly dropped after 20th December and has only just returned convincingly since 6th March. This date also gave us the head & shoulder failure, rejecting the neckline with force, which played out to form a large descending wedge (outlined in blue). The descending wedge offers a target of approximately 11k and although it broke to the upside, Btc is currently returning for a retest of the wedge break point. 8k is a level I'm watching for support, if it holds steady this could be an excellent position for a long swing trade to the heavy resistance at 9.5k. And if it fails, a convincing short opportunity could present itself.

The current position shows potential to form another inverse head and shoulders pattern. If this forms I'll be using this to reinforce potential to fulfill the descending wedge target. Should that succeed it'd be wise to pay attention to heavy resistance around 9.5k (indicated by the yellow line). I expect this to present difficulty for bulls, as this line operated as support during Feb and early March. Since then it's already been rejected, presenting a key resistance point on 12th March.

The bear scenario is currenly looking convincing. People are talking about the dreaded death cross, but we've already seen the 50 and 100 EMA crossover back on 23rd January. This was followed by one of the strongest down trends Bitcoin has ever seen. We've had two lows touching on my white dashed trendlines indicating levels of critical support. Failure here could see a revisit to the 4-6k region. I've also marked two feint dotted white lines which have served as a descending diagonal support. The second of which (on the right) served as resistance during Feb and early March, and now support. Another touch on this trendline could take Btc well below 6k. It's certainly one to watch if the bear scenario plays out.

I'm waiting for indications of direction as this volatility squeeze reaches it's pressure point, which could see us through to 7th April, at which point I'll be looking to enter trades accordingly. Good luck and happy trading.