Twilight of the Bitcoin Market Cycle?

7 июн. 2018 г.

Hello friends,

It's been a while since my last post; lack of time and an urge to do more research has mainly driven me to take a break from posting ideas on TradingView. I am still in the process of doing more research and study, but I figure posting once in a while couldn't hurt.

Since I have become recently very convinced about this, I am outlining a very possible situation with Bitcoin where the trend line we have been on since early October breaks, reaching around a temporary low of $5000. This is examined on the daily chart, since this is one of the best charts to examine trends of this size. I have to first and foremost say that I am not trying to spread fear, I know many people do not like to hear bearish ideas, but technical analysis is ultimately a rational exercise, and I feel that possibilities with very strong signs should be explored.

There are a few things to look at, but I first want to talk about the big picture with, long-term support and resistance lines. I think most people can agree that there was a very significant downtrending resistance line that began from the peak of the ATH in late December, to the low of around $6400 (thick red line). After the break from that line, it seems we moved into a sideways trend, bouncing back and forth between an emerging downtrending resistance line (light red) and a support line that we seem to have been respecting since mid-October (light green); at least this appears to be the case with the lows, where the angle's effectiveness appears very strongly. Finally, based on previous bounces, we can establish a support of around $5000-$5300 (I've thus created a small support zone around that range, in dark green), as well as lower supports around $3200 and $2000 (though I do not believe these will be reached, in dark green).

Now, onto the analysis - it's no secret that Bitcoin has been squeezing in, ready for a significant move either upwards or downwards. Initially I considered the upwards move to be more likely due to the significant media attention cryptocurrency has been receiving, but after viewing previous market cycles of Bitcoin (check 2013), it seems clear to me that the bearish scenario of closing in on the market cycle is very likely, and should at the very least be prepared for with proper risk management. According to Dow Theory, which is said to have laid the foundations of modern technical analysis, history repeats itself, and this is a situation where we forced to consider this.

Should we break from the line, we will likely fall straight down to the $5000-$5000 area, where we will shoot back up and bounce towards around $6700 or so (maybe a little less). From there one, we will likely enter a sideways trend, which we will continue until we see higher highs and higher lows and parabolic movement returns, which could lead to us challenging the all-time high, and hitting 35k-50k.

NOTE: I seem to have reached the max character limit for this section of the idea, so I will continue my text below.

7 июн. 2018 г.

Заметка

Onto the short-term:


Scenario A:

The reason why I have drawn this movement into a pennant is this way, is simply because we have been moving through this ascending triangle for quite a while now (May 23rd to today). I don't think that the pattern will be sufficient to directly lead into a strong sell-off, but we should consider that the size of ascending triangle suggests a small movement downwards at the very least, which can create a higher low, and thus move into position into a bearish pennant. Why would a bearish pennant occur here and not have a bounce to $8500-$8700? The reason is in positioning - the huge downtrend (May 5th to May 26th) creates a very nice flagpole in which it hits around the $5000 area very perfectly, and thus I would not be surprised if this happens.

Second reason: on the Stoch RSI indicator on the daily chart, it appears to be dangerously high, which would suggest it being oversold. For the most part, it seems to have called lows and highs, at least to some extent. This overdrawn movement may very well have increased the likelyhood of Bitcoin being oversold. This could suggest that this is the last step into a sharp downturn, but this does not preclude Situation B. Volume has also been steadily decreasing, but this is the case with any sort of consolidation, I believe.

Finally, the lines I have drawn below the triangle are simply bounces that I think seem fairly reasonable. The length from to support to the lines correlate with the length of the flagpole, of course, though it may seem chopped off due to the huge line from the long-term support downwards.


Scenario B:

This is much simpler, Bitcoin hits the upper resistance line, bounces off, challenges the lower support line, and we potentially see a break, and the rest unfolds from there.


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With all this being said, do not fear if you are hoping for more parabolic movement - this likely will not be the end, and will simply be the set up for a long, drawn out sideways movement until the first signs of bullish activity begin and we start all over again. If you are longing around here, please consider using risk management, prepare for every possibility. If you are shorting, the same applies.

Please trade with care. I wish the best to all traders!

8 июн. 2018 г.

Заметка

After re-reading my idea over, I realized a few mistakes I made, especially in one sentence that was just flat out incomplete, corrections:

*"on the Stoch RSI indicator on the daily chart, it appears to be dangerously high, which would suggest it being [overbought]. For the most part, it seems to have called lows and highs, at least to some extent. This overdrawn movement may very well have increased the likelyhood of Bitcoin being [overbought]."

*"The length from [7800, (i.e. the upper resistance line of the rising wedge)] to [the major] support [at $5000] correlate with the length of the flagpole, of course, though it may seem chopped off due to the huge line from the long-term support downwards. "

8 июн. 2018 г.

Заметка

This really is a very minor note, but I just want to emphasize that the rising wedge (which I erroneously refer to as an ascending triangle, a bad habit I have) entering a bearish pennant is more based on intuition than anything. Also, this pennant is mainly based on the conservative assumption that the break will happen at 7900, if it happens at 7700 where we seem to be general resistance, the pennant would look something like this: