Market Overview: Bitcoin
Bitcoin‘s price action presents an interesting landscape, where some traders perceive a potential long-term top on the weekly chart and favor an “always in short” strategy in the near term.
A retest of the $50,000 support level is still more likely before another challenge to the $70,000 double top. This dynamic environment provides ample trading opportunities across multiple timeframes, monthly (low 2 setup), weekly and daily.
Bearish setups are prevalent. However, these bearish setups are also interesting to watch for the bulls, who can capitalize betting on failed bear setups.
Bitcoin
The Weekly chart of Bitcoin
Bitcoin’s price trajectory has been marked by a significant rally from $30,000 to over $70,000, followed by a prolonged period of consolidation within a $15,000 range. This consolidation phase, spanning 17 weeks, has displayed characteristics of a limit order market, with traders employing buy low, sell high, and scalp trading strategies.
Five weeks ago, a cautionary note was issued regarding potential short-term bearish momentum as the price encountered resistance at the $70,000 level for the third time. The subsequent downward pressure may have been triggered by bears selling at $70,000 with limit orders, but a more likely scenario is that bulls were strategically exiting their positions, abandoning the short-term possibility of trend resumption.
A significant development occurred last week as the price closed below the 20-week exponential moving average (EMA) for the first time since the onset of the bull trend. This week, the current candle formation suggests a bull inside bar, positioned below the EMA without making contact – a configuration known as a 20-EMA gap bar setup.
Analysis of the initial pullback during April indicated that if bears intended to establish a long-term top, they would first create an EMA gap bar. This week may witness the emergence of such a pattern, after a second leg down since the all-time high. While an EMA gap bar is typically considered a bullish setup under the right conditions, the current context presents a more nuanced picture.
Several factors contribute to this uncertainty. Firstly, some traders are operating under the assumption of an always in short market following a recent bear breakout. This perspective leads them to anticipate pullbacks and implement bearish selling strategies accordingly. Secondly, the bulls who abandoned their positions at $70,000, thus initiating the recent fall, are unlikely to re-enter the market around the current price level of $60,000.
Consequently, it is more probable that the current movement is merely a pullback, with the price expected to continue its sideways to downward trajectory in the coming weeks. Bears are likely to capitalize on this sentiment by selling around the current price or within the $60,000 to $65,000 range, anticipating the formation of a lower high, which will offer a good trader’s equation aiming to test the $50000 support.
The prevailing odds favor a retest of the $50,000 region, a significant prior breakout point, as bears seek to assert their dominance and establish further downward momentum.
The Daily chart of Bitcoin
The Bitcoin daily chart has been characterized by a distinct trading range since early March, a pattern previously analyzed by dividing the range into thirds. This analysis highlighted the typical behavior of traders within such ranges: buying in the lower third, selling in the upper third, and taking profits in the middle third.
Historically, 80% of breakout attempts within a trading range fail. A prior warning was issued that after five or six unsuccessful breakouts, the range tends to expand, demanding increased vigilance from traders.
A breakout mode pattern emerged at the top of the trading range between late May and early June, signaling the potential for either a bullish breakout or a downward reversal. The bullish scenario appeared more favorable due to the presence of a cup and handle-like formation at the range’s upper limit. In contrast, a bearish breakout from this pattern posed a challenging sell opportunity, as it would have originated from the middle third of the range – a generally inadvisable action.
Ultimately, the bearish scenario played out, resulting in the formation of a bear channel that broke out at the 200-day moving average (SMA) and subsequently breached a lower low. Throughout the week, the price has repeatedly tested the breakout point and the 200-day SMA.
Currently, the price remains below the upper bear channel trend line, and a confluence of resistances has formed with the 200 SMA, the breakout point, the bear channel trend line, and the $60,000 psychological level.
Traders are closely monitoring these levels, with some aiming to buy into a failed breakout below these areas and others looking to sell a reversal should the bulls fail to regain control. The Bulls have already made two unsuccessful attempts to breach the breakout point and the 200 SMA, and while a third attempt remains possible, it could also mark a point of capitulation.
Those buying at current levels are operating under the assumption of an expanding triangle formation, having profited from previous buys below the latest breakout point, if they scaled in $4,000 below. If this bullish sentiment wanes, they might buy again $4,000 below the current July low, if the price keeps falling.
Conversely, bears anticipate the continuation of the bear trend, interpreting the current pattern as a bear flag. They are poised to enter short positions, utilizing various triggers such as limit orders at the 200 SMA, the breakout point, the $60,000 level, the 20-day EMA, or the bear channel trend line. Alternatively, they might await a strong bear bar and enter with a stop order below it.
Thank you for following our analysis. We hope these insights prove valuable in navigating the markets. As always, we encourage you to share your thoughts and observations in the comments section below, and to share this analysis with fellow traders who may find it useful.
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Weekly chart is an ioi pattern completing wedge bull flag at 20ema alongside what Josep highlighted i.e. 20 ema gap bar buy setup. This is a classical breakout mode pattern to me in bull favor and while writing this comment I see BTC/USD price level above 63k. If this week close as bull bar it will attract more buyers.
Yeah, the bull case is getting stronger because last week closed real strong. This was a strong buy signal bar on the weekly chart after two legs down from the ATH. The bear hopes for another leg down from the double top. However, the June Doji bar weaken this.
On the daily chart, we see stronger bull bars closing near their high that broke the bear trend line and MA. It looks like we might see a HL or LL MTR soon.
Hi Water Buffalo,
Thank you for sharing your analysis. I completely agree with your assessment of the strengthening bull case. Last week’s strong close was undoubtedly a significant buy signal.
Your observations on the daily chart are spot-on. The strong bull bars closing near their highs, coupled with the break above the bear trend line and moving averages, paint a better picture for the bulls.
I appreciate your insights and look forward to reading more of your analysis in the future.
Josep
Hi Eli,
Thank you for your insightful comment. You demonstrated a keen understanding of the market’s dynamics and accurately anticipated this week’s bullish move. The IOI pattern within the wedge, combined with the 20 EMA gap, was indeed a strong indicator of potential reversal.
I acknowledge that my assessment last week was more conservative. The four consecutive bear bars led me to believe that we were already always in short and the bullish reversal was not imminent, but the market quickly proved me wrong: Sunday’s powerful upward move was a testament to the underlying strength of the bulls, and it’s impressive that they were able to even bypass the EMA Gap setup.
Your comments consistently provide valuable perspectives, and I appreciate your ongoing engagement with our weekly reports. Thank you for sharing your expertise with the community.
Josep
Last sentence – Lets see but for me I can’t see a move to 50k but time will tell
I could argue that on the weekly we have a three push down to bottom of TR and bull inside bar. Not a great signal bar but about 75 range of prior week and also three large bear bars but week 01 July is exhaustion and we are at support (prior breakout point).
Agree daily in TR and we close above MA on 14 June with a gap. Also evident is the 3 push down wedge. Could this go further and form a higher low MTR ? – perhaps yes.
Lets see but for me I can see a move to 50k but time will tell
Hi Tom C,
Your assessment of the situation turned out to be remarkably accurate. The observation of the three-push down pattern on both the weekly and daily charts was insightful. While I was leaning towards a continuation of the downward trend due to bulls abandoning at the 70k level, the market clearly demonstrated resilience around immediate supports.
I appreciate your detailed analysis and willingness to consider multiple scenarios. Your ability to identify and interpret key patterns in the market is evident, and I look forward to reading more of your insights in the future.
Josep