Market Overview: Bitcoin
Bitcoin bull reversal within a limit order market. This week, we explore the intricacies of the limit order market structure that continues to dominate Bitcoin’s weekly price action and understand why this week’s bullish trend bar aligns with this pattern and what it means for traders.
Bitcoin
The Weekly chart of Bitcoin
Bitcoin’s price action this week reversed upward, forming a bullish trend bar that might close near its high, breaking above last week’s bearish bar. This shift, while seemingly positive, aligns with the prevailing market structure we’ve observed in recent reports.
Recall that the market has been operating in a limit order market mode, characterized by traders buying low on bearish candles and selling high on bullish candles, essentially mirroring the behavior typically seen in a trending market. This week’s bullish trend bar fits this pattern, underscoring the continuation of the range-bound environment.
What would be surprising, and potentially indicative of a change in market behavior, is sustained pressure on one side. This could start manifesting if the following week is a strong follow-through bar after this week’s bullish trend bar, signaling a potential shift away from the limit order market and toward a trending trend.
Such a change would be welcomed by most traders who thrive in trending markets, where trading in the direction of the trend often yields higher probabilities of success. However, it’s important to remain cautious until a clear breakout from the current trading range occurs.
As we’ve emphasized before, patience is key for the majority of traders. The most prudent approach is to wait for the market to transition into a stop order market, marked by decisive breakouts and sustained pressure on one side, before making significant trading decisions.
Experienced traders, on the other hand, can continue to participate in the range-bound environment by adapting their strategies accordingly. This involves focusing on “scalping” trades with smaller price movements and maintaining a contrarian approach.
The ultimate goal is to identify a breakout from the current trading range, especially after a period of contraction. Such a breakout would attract trend-focused traders and signal a significant shift in Bitcoin’s price action, potentially offering clearer directional trading opportunities. Until then, traders should be prepared to adapt their strategies to the prevailing market conditions and exercise caution in their decision-making.
The Daily chart of Bitcoin
The prior week’s report highlighted the potential for bulls to profit or break even when buying within the bottom third of the trading range. This week’s price action validated that prediction, surging up from the bottom third and even breaking out of a Triangle Pattern. However, the breakout’s location within the middle of the trading range raises concerns about its reliability.
The bulls buying within the bottom third of the trading range were able to capitalize on the recent price surge. Bitcoin not only rebounded from this support zone but also broke out of a Triangle Pattern. However, this breakout occurred within the “no man’s land”: the middle of the trading range, raising concerns about its reliability due to the 50/50 probability of either direction in this zone.
This uncertainty extends to both bulls and bears. While bulls may be eyeing the April 5th high, bears are likely focusing on the double top formation after bulls achieved a 2-legged move. The current price action suggests a potential battle between these two forces.
Another scenario is that the pattern begins to contract around the “no man’s land” zone. This would make patterns within this area even less tradable until there is a strong breakout. For now, Traders should ideally wait for reversal patterns to emerge at either the top third of the trading range (for bearish signals) or the bottom third (for bullish signals).
We invite you to share your thoughts on Bitcoin’s current price action and potential future movements in the comments below. Feel free to share this analysis with your fellow traders and let’s discuss the possibilities together!
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Thanks Josep for your great report. The location and the structure of the current TR on the weekly chart is interesting from the following reasons: (a) it is a classical setup of 20 bar ema buy. (b) it is a classical bull flag (wedge bottom) at the 20 ema area that attract buyers and seems bulls are breaking the flag structure. Therefore, I anticipate 3 scenarios of PA behave: (1) retest of the ATH is likely. (2) reverse from TR top and TR PA continuation. (3) Final flag that could lead to a MM based upon the size of the current wedge bottom toward the 86k area. Also note the similarity on the TR weekly structure that have started by 12/23.