Market Overview: Bitcoin
On the weekly chart of Bitcoin, a failed bullish reversal confirms the persistence of the limit order market, highlighting the need for patience and strategic decision-making. Meanwhile, the daily chart paints a picture of a potential turning point, as bulls defend critical support levels and bears test their resolve. Will a decisive breakout emerge, or will the range-bound environment continue to dictate the market’s rhythm? Join us as we delve into the details and explore the key insights for both short-term and long-term traders.
Bitcoin
The Weekly chart of Bitcoin
This week, Bitcoin’s price action reversed downward from above the previous week’s bullish reversal bar, confirming our suspicions outlined in the prior report. Last week’s rebound from the 20-week EMA, while initially promising, did not signify the start of a new bull channel, as we cautioned.
The price action continues to unfold within the “limit order trading market mode,” which we have consistently observed following a buy vacuum test of resistance. This week’s downward reversal from a buy stop order setup further solidifies this market structure.
The prevailing limit order market, also known as a TTR (Trading The Range) market, suggests limited upside potential for Bitcoin. Traders should anticipate “scalping” trades with price movements of $5000 or less as the norm. This range-bound environment presents two distinct strategies:
- Remain Patient: The most prudent course of action for the majority of traders is to exercise patience and wait for the market to transition into a stop order market, characterized by decisive breakouts and sustained pressure on one side.
- Adapt to the Range: More experienced traders can participate in the range-bound environment by adopting a contrarian approach. This involves buying low near the bottom of bearish candles or selling high near the top of bullish candles, essentially mirroring the behavior typically seen in a trending market.
Ideally, a TTR market will contract over time, creating smaller breakout mode patterns such as tighter trading ranges or triangle patterns. These contractions often serve as a prelude to a breakout, which would attract traders who specialize in profiting from trends, as trading in the direction of a trend generally has a higher probability of success.
The key takeaway is that a breakout from the current trading range, particularly after a period of contraction, is crucial for a significant shift in Bitcoin’s price action. Traders should be prepared to adapt their strategies accordingly when this breakout occurs, as it will signal a departure from the range-bound conditions and potentially offer clearer directional trading opportunities.
The Daily chart of Bitcoin
Bitcoin tested the Trading Range Apex and the lower high, early during the week. The Bulls, despite their efforts, were unable to secure a close above the prior lower high, diminishing the likelihood of an imminent strong upward move.
However, the bulls successfully stopped out the bears who sold the last bear breakout, represented by the April 30th and May 1st bars. This development implies that even if a strong bear breakout occurs from this point, bulls have a reasonable chance of either profiting or at least breaking even, as they would be buying at a favorable price point: low, within the bottom third of the trading range.
Friday’s Outside Down bar, which erased a prior bullish Outside bar, formed an OO (Outside-Outside) pattern. This pattern typically emerges near the EMA within a weak bear channel, that characterizes by bulls easily profiting from buying below lower lows. As discussed earlier, there’s no compelling reason for bulls to cease buying low.
Bears, on the other hand, face a difficult task selling around the current prices, which reside within the bottom third of the trading range. Recall that the last bear breakout failed, and we are now revisiting those same price levels. Why should this time be any different? It’s possible we may witness a sell vacuum test of support, such as the Major Higher Low (MHL), which coincidentally aligns with the significant $50,000 round number. However, as we’ve emphasized, even this scenario would likely attract bulls, thereby mitigating further downside risks.
We encourage you to share your thoughts and insights in the comments below. Please let us know your perspective on Bitcoin’s current price action and what you anticipate in the coming week. Share this analysis with your fellow traders and let’s foster a valuable discussion. Wishing you all a successful and profitable trading week ahead!
Market analysis reports archive
You can access all the weekend reports on the Market Analysis page.
