Market Overview: Bitcoin
In the weekly chart of Bitcoin, the price action is oscillating within a trading range as it approaches key upper magnets, with the potential to test the all-time high soon. On the daily chart, last week’s breakout points served as support, and a bull flag was formed. This week, Bitcoin has been developing within this formation, while the upcoming monthly candle close is nearby. Bulls aim to keep the price above the prior month’s high to bolster their position, while bears will attempt to prevent that, since a close above the month’s open would mark consecutive bullish months, possibly preceding an all-time high test.
Bitcoin
The Weekly chart of Bitcoin
Bitcoin’s weekly chart currently sits within a market cycle that is best described as a trading range environment. Traders are placing limit orders at critical points, particularly within the $60,000 to $70,000 zone. These levels have become crucial support and resistance zones, as traders react to psychologically significant price levels. Buyers are clustered near support around $60,000, while sellers have been active around the resistance at $70,000. The market is currently balanced between these levels, reflecting the indecision of both bulls and bears.
Despite the ongoing consolidation, the always in position on the weekly chart remains biased towards the bulls, due to the breakout that occurred early on the year. That bull breakout preceded the formation of a potential bull flag, but the extended consolidation afterward has cooled some of that momentum. Last week’s price action, which featured a strong bull bar, provided a bullish stop order signal. However, as seen in past price action near $70,000, and as we anticipated this possibility within the past week’s report, selling emerged after such strong bull close, leading to a pullback this week.
This pullback suggests that bears may be forming a double top, with the current price movement resembling a wedge top pattern. Some bears entered short positions as a scalp, anticipating a decline toward the low of the previous bull signal bar. Despite this bearish activity, the market remains tilted to the upside, with bulls determined to test higher levels. The current weekly candle, while still forming, lacks a strong sell signal. However, if it closes near its low or below its midpoint or near the low, this could incite further bearish pressure in the coming weeks.
From a broader perspective, bulls are confident that the market remains within a bull trend and is preparing for a retest of the all-time high. The series of lower highs on the chart acts as magnets that may attract buyers. Recent failures by the bears to reverse the trend suggest that the price may soon revisit the extreme upside side of this trading range. Thus, despite short-term pullbacks, the overall sentiment remains bullish, and traders should watch for a potential upside move.
The Daily chart of Bitcoin
On the daily chart, Bitcoin’s last week’s breakout above key resistance levels reaffirming the bullish outlook. Notably, the breakout surpassed a minor high and a previous higher high, points where bears had established positions, and they may have exited breakeven this week. The ability of the bulls to rebound from these levels may underscore their dominance.
September saw Bitcoin moving within a tight bull channel, and the subsequent two-legged pullback in October formed a double bottom near $60,000, providing solid support, and then the past week’s breakout of the previous higher high. The current week’s price action has been largely sideways, forming a bull flag. This consolidation near the breakout point is constructive for bulls, as it suggests that buyers are willing to step in on any dips. The breakout points from the previous week have held firm as support, adding further confidence for bullish traders.
Bears, however, are highlighting the possibility of a larger wedge top formation, which could signal a deeper reversal. Their argument is that the price is nearing key resistance levels near $70,000, a point where previous rallies have failed. Nonetheless, the price remains close to strong magnets, and the path of least resistance appears to be to the upside. Bears will need a decisive breakout below the bull flag to initiate a more significant move lower, but even then, they would face support from the broad bull channel’s lower trend line, which may limit their downside potential.
For the bulls, the roadmap is clear: they aim to culminate a two-legged measured move from October’s pullback and retest the all-time. Many traders are likely to set their stop loss just below the hypothetical bull breakout low. Bulls expected the first attempt down to fail, which would set up another test of the past week’s high. Traders who placed limit orders at the breakout points are now sitting in their positions with the stop loss at the major higher low. Entering after a breakout of the bull flag presents an attractive setup, especially with strong magnets above, making it a high-probability trade with acceptable risk.
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