Market Overview: Bitcoin
Bitcoin‘s last week’s analysis, highlighted the potential for a major top formation as the market entered an “always in short” market, coupled with the appearance of the first weekly EMA gap after a robust bull trend. However, the market defied expectations, closing the week without a gap, suggesting either a resurgence of bull strength or a lack of conviction among bears.
Despite this turn of events, the price remains confined within the range established over the past 20 weeks. The recent strong bullish reaction has raised the possibility of a retest of the all-time high, but the odds for both bulls and bears remain balanced at 50%. The coming weeks will be crucial in determining whether this bullish momentum can be sustained or if the market will revert to range-bound behavior.
Bitcoin
The Weekly chart of Bitcoin
Bitcoin’s price action has been characterized by a remarkable surge from $30,000 to over $70,000, followed by a protracted period of consolidation within a $15,000 range. This consolidation, now spanning 19 weeks, has displayed hallmarks of a limit order market, with traders engaging in buy low, sell high, and scalp strategies.
Six weeks ago, we cautioned about potential short-term bearish momentum as the price tested the $70,000 resistance for the third time. The subsequent downward pressure may have resulted from bears selling at $70,000 with limit orders, or more likely, bulls strategically taking profits and abandoning the short-term possibility of trend continuation.
A pivotal moment occurred two weeks ago as the price closed below the 20-week exponential moving average (EMA) for the first time since the bull trend began.
Last week, at the time of our report, an “ioi pattern” emerged, but the inside bar lacked strength. Additionally, an “EMA Gap bar” buy setup was present. However, before the week concluded, bulls orchestrated a powerful surge on Sunday, resulting in a strong bull signal bar and notably closing the gap between the price and the EMA.
Astute readers of our report noted in the comments section the potential turning point for the bulls early this week. Indeed, last week’s “ioi” setup was bought, and the current week is witnessing a robust follow-through.
Traders are now pondering the next phase. This week’s price action saw bulls reclaim crucial gaps created by bears during the recent breakout. A trade above the Major Lower High would invalidate the bearish thesis, but for now, the most plausible scenario for bears is a continuation of range-bound behavior, potentially testing the “ioi” low.
Bulls, on the other hand, envision a reversal from the bull flag’s low, either through continued upward movement or sideways consolidation followed by a breakout above the Major Lower High. They point to various failed bear setups, such as the failed breakout below the trading range and the EMA.
Since the pullback from the bull climax began, nearly 20 bars have elapsed. After approximately 20 bars of sideways trading, the likelihood of the prior trend continuing diminishes to 50%.
The Daily chart of Bitcoin
The Bitcoin daily chart has been characterized by a clear trading range since early March, a pattern we previously dissected by dividing the range into thirds. This analysis emphasized the typical trader behavior 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. We cautioned that after five or six unsuccessful breakouts, the range tends to expand, necessitating heightened trader vigilance.
A breakout mode pattern formed 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 seemed more likely due to the presence of a cup and handle-like formation at the range’s upper limit. Conversely, a bearish breakout from this pattern presented a difficult sell opportunity, as it would have originated from the middle third of the range – a generally ill-advised action.
Ultimately, the bearish scenario unfolded, resulting in the formation of a bear channel that broke out at the 200-day simple moving average (SMA) and subsequently breached a lower low. Last Sunday, the price made its third attempt to break above a prior lower low, which also acted as a breakout point. Bulls succeeded, and on Monday, bears covered their shorts accumulated at the 200 SMA and their limit orders at the Breakout Point or the $60000 big round number. This led to a climatic bull bar.
While the price is currently always in long, it remains within the range, even reaching the upper third. As we know, traders buy low and sell high in trading ranges, avoiding the middle third. Therefore, this bull breakout was challenging to buy unless bulls had placed limit orders below the April low or the $55000 big round number. Buying Monday’s strong bull bar was difficult, as the close was within the middle third of the trading range.
The Bulls likely desire a pullback into the lower third zone for a potential second leg up. Bears may attempt to sell into bull strength at the top of the channel, but as mentioned, the trading range has already seen multiple legs and could continue expanding upwards.
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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Thanks Josep for your detailed report!
For all practical purpose despite the accumulated bull pressure occurred in the past 2 weeks, the ioi pattern as well as the 20ema gap bar, we are experiencing a classical TR behave wherbuy false bear breakout attracting bulls to buy at the bottom of a TR betting for reversal toward the upper side of the TR.
On the daily, despite the strong bull presuare and associated gaps in place, I’m more for a 2nd leg trap underway unless bulls will strongly break above the previous high and will drive the price further up.
Hi Josep, very good, in depth analysis this week. The M trend is up and leg 1 pullback is not as yet at/close to EMA. A MM target here is 88k. The W trend is up, currently a bull flag – horiz
channel (3 touches lower & upper). Also H2 with signal bar 8th July after testing BO from 19 Feb 24. Could also argue for a LH MTR !. MM target here is 90k.
There is also the possibility (as you pointed out) TR continuation so we get to 70 approx and then back down to 55. If that I would look for a turn point 50%.
Good analysis by you on daily but I see lots of bull gaps so mkt is strong. have good week