已更新

Bitcoin Head & Shoulders or More Consolidating?

Hi guys, thanks for taking the time to read this analysis.

So my last idea was a risky long trade for a scalp that was positioned at the top of the descending channel, and this one obviously didn’t play out.
Before that idea however, I posted about BTC consolidation and how I was leaning more bearish over the long-term.
Since then we have dropped extremely quickly back down towards the 10k range, and the volume has been quite high as well.

Now when we take a look at the bigger time frames, we can see 2 potential scenarios playing out in the long run:
1.) The first scenario is a head & shoulders pattern with a neckline defined by the rising black trend line. If this neckline breaks with a confirmed candle close, then we should see price fall down towards the 0.236 fib level which is also around the target of the measured move.
a. This is the most likely scenario to occur, however we are hitting some solid supports (see below) so we would need that neckline to break in order to confirm more downside.
b. When we look at the weekly chart, the picture looks grim. Price is still confined in that descending channel, there is a clear double-top formation here, and the RSI, MACD, and Sentiment Index are all showing bearish
divergences. With bearish divergence on the weekly chart, we could be looking at a multi-month bear trend. This would obviously be a huge blow to the first half of this incredibly bullish year, but it doesn’t necessarily mean
we are now entering a bear market. It could just be the first major correction down this year before the market finds some ground to begin moving up again.

2.) The second scenario on the right shows that Bitcoin will continue to consolidate in this bigger wedge. This wedge does not appear to have a bullish or bearish bias at the moment, however if 10k continues to hold, it opens the door for a bullish scenario which would be confirmed by the breakout of the top of that wedge.
a. For the bullish scenario, we can see that Bitcoin is hitting support with that rising red trend line (same line as neckline above), the 0.382 fib, the 0.786 fib, and also the mid-line of the larger descending channel that Bitcoin
has been confined in. RSI is very oversold on the 4hr and MACD is showing the early signs of reversal as well. If we see a strong bounce and reversal from this zone over the next few days, then this consolidation scenario
becomes much more likely.

So that is where we are at right now on the medium to long term on Bitcoin. The main thing to differentiate the 2 scenarios will be whether or not that neckline (rising trend line) breaks or holds in the upcoming days.
I am obviously leaning more bearish at the moment, but we will have to see how things play out.
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註釋

Price is hitting a resistance zone now. When we look up at the head & shoulders chart on the left, we can see that the pattern is still valid, though the neckline has held so far. If we drop from here with some high volume with it, then this pattern will most likely work out.
However, the more we climb, the more realistic the pattern on the right becomes. If the right shoulder gets crossed with a candle close, then we can scrap that pattern altogether and assume that Bitcoin is still bullish in the coming days.
Wish I had more details and/or signals to provide you, but picture is still not quite clear right now

註釋

If price manages to drop down towards 10k within the next couple of days, that Head&shoulders pattern will become very realistic. Of course, the neckline will have to break to be considered valid.

註釋

Price has now reached the neckline of the Head & Shoulders pattern shown above. This black trendline is defining the neckline as you can see here:

What’s interesting to me is the fact that after that last bounce off the black trend line, the price failed to even reach back up towards the descending blue channel (circled). This type of action is very bearish to me, especially since we are right back at the black trend line. We will have to monitor this today and tomorrow to see how price reacts to this line. If we can get a daily break and close below this line, it is safe to assume the Head & Shoulders will most likely play out.

註釋

Oh and by the way, just to follow up my last update, a perfect rejection down from that resistance zone I pointed out 2 days ago :)

註釋

Getting a slight bounce off the major rising black trend line. Doesn’t look strong though and when we look at past price action as well as the movement on indicators, we can see some similarities to the drop pointed out on the left. We saw with MACD and RSI at these positions and it created a small bear flag before continuing to drop. So this is what I am expecting to see if it plays out the same way. That yellow zone I drew just above here is the amount I expect Bitcoin to climb before dropping again. So if that yellow zone breaks, we will have to assume that black trend line is holding strong and can expect another move up in the coming day or 2.

註釋

Well that worked out nicely, price came up exactly up to that yellow zone I pointed out yesterday and dropped:

But now we are seeing some strong bullish divergences building on the 4 hour time frame, and the bulls are desperately trying to keep this up. Obviously if the bears continue to keep control of this, the divergences can get wiped out so that is what we are looking for now. Just don't ignore those divergences if the price is able to settle around here and hold support

註釋

Take a look at the daily chart. Candle body is still above this major ascending black trend line (neckline of Head & Shoulders). This is something to keep a close eye on. Even if that breaks, don’t forget we have that very strong support zone (in yellow) around the major 0.382 fib level with room to wick down towards 9k.

When we look at the 4hr chart, we see some massive bullish divergences building on RSI, MACD, and Sentiment Index, as well as bearish RSI exhaustion. Some of these can even be seen on higher time frames like the 6hr and 8hr.

On top of that, when we look at the bitcoin sentiment analysis, there is extreme fear in the market at one of the lowest levels we have seen all year (5).
So at this point, the bulls are slightly in favor right now but if the bears manage to break that trend line and more importantly that yellow support zone then we will finally get an answer to which direction the market will move in the coming months (down). If the bulls push it up from here however, then Bitcoin remains in this broad consolidation phase and the answer will still be unclear. We would probably want to see a significant move up today by the bulls to assume that we won’t see a big break to the downside yet.

註釋

So this resistance zone I drew up yesterday is still holding price down it seems. My take on this, is if that zone breaks and closes then we could see a bullish move up that I described in my last update. Otherwise I expect more downside and we will assess as it develops

註釋

Price is currently breaking that yellow resistance zone now. Looks like those bullish divergences are now playing out. I'm not sure how high this will go, but it doesn't look like it's going to drop any time soon.

註釋

Looks like the head & shoulders on the daily is leading the charge. Despite all the bullish indications, the bulls just weren't strong enough to push price up again. So now we are seeing supports breaking. The last support is around 9k and once that breaks, price should reach 7k-7,500 region

註釋

So this support is holding so far. I think it's too soon to predict where price is going but I am seeing some bullish signs right now. When we look at the wedge on my original chart at the top right, we see price hasn't pierced below that range yet. So the H&S pattern isn't exactly confirmed yet despite the trend line being broken. This could be a bear fakeout, and we can see price move back up inside that wedge. 9k-9.5k seems to be a really strong support area so if it hold price up we can expect upside. But as soon as 9k is broken, it's likely we visit that 7k region I mentioned yesterday

註釋

As I mentioned in my last update, the H&S pattern isn't exactly confirmed yet because we haven't seen 9k break once again. This support area was strong enough and the bullish divergences got extended but were still present and I decided to go long around 9.7k. I apologize for not giving any updates, I've had a very busy weekend. Anyways, now we look at that wedge on the right (scroll all the way up to original chart) seems to be playing out. So we should expect price to reach around 11.3k before things become more clear. It's possible the wedge continues to confine price and we drop again so just be aware of that when price approaches the top of that wedge

註釋

This is the next major resistance area to keep your eye on:

註釋

Looks like an ascending triangle is forming here on the hourly. If price can break this top, then we should get to 11k-11.2k range soon after. That blue descending line in my snapshot is the same major trend line I drew above in my last update. This is where we should see even tougher resistance:

註釋

Looks like a legit breakout of the triangle, just needs to get past this 0.5 fib. Once that happens, 11.1-11.2k should get hit soon.

註釋

Price wasn't able to break that 0.5 fib I mentioned in my previous update and ended up dropping. I also realized there was this major trend line that price reacted from that I forgot to include in that update. Since then we have seen a couple wicks up to the line and rejection. This can prove to be an important trend line to keep our eye on for larger time frame: