Market Overview: Bitcoin
After a year of remarkable highs, Bitcoin appears to be facing a significant crossroads. The April monthly candle tells a tale of fading bullish momentum, closing near its lows after a failed breakout above the previous all-time high. The weekly chart highlights a limit order market, where bulls are attempting to find support but face persistent selling pressure from bears.
Will the bulls regain control and ignite a new uptrend, or is this the beginning of a deeper correction within the overall market? This edition of our Bitcoin Weekly Report delves into these crucial questions, exploring the price action patterns that are shaping Bitcoin.
Bitcoin
The Monthly chart of Bitcoin
April delivered a bearish signal, closing near its monthly low. This marks the first bearish bar on the monthly chart since August 2023, suggesting a potential setback for the bullish momentum. The bearish movement emerges after a breakout above the previous all-time high, hinting that this prior breakout might be failing.
The preceding six bullish bars formed a micro channel, characterized by an increasing bar size as the price surged towards the all-time high. This pattern aligns with a buy vacuum test of resistance, a scenario where there is rapid upward movement towards a key resistance.
The fact that bears managed to push the price near the monthly low indicates that bulls may be weakening. Furthermore, April’s bearish bar filled a body gap created with the close of October 2021, further emphasizing the dwindling bullish strength.
We’ve previously said that initial pullbacks after a substantial bullish run frequently attract buyers. Nonetheless, the current market climate suggests that buying the dip may not be immediately profitable unless bulls demonstrate renewed interest at lower price levels.
It might be plausible, to consider selling below the April lows. However, this is an aggressive stance, and more risk-averse traders might opt to wait for confirmation such as the formation of a micro double top, or follow through.
The most probable scenario for the coming months leans toward sideways to down movement. April’s bearish bar signals that buyers were unable to find value higher than the previous all-time high. Thus, the bulls might seek to re-enter at more attractive levels closer to the 20-month EMA. This suggests the possibility of a period of consolidation or further decline as the market adjusts to the recent price action.
The Weekly chart of Bitcoin
In recent reports, we noted that bearish pressure following a buy climax wasn’t particularly strong. We thought of a potential buying opportunity for bulls near the 20-week EMA, especially if the market didn’t exhibit an ‘always in short’ as it approached that level. This condition was met – during a Tight Trading Range (TTR) the price did a sell vacuum test of the EMA, prompting buying activity.
This bullish response likely originated from two groups: bears looking to exit profitable positions from the previous sells of buy climax, and bulls anticipating short-term gains on the back of this profit-taking. Therefore, this movement shouldn’t be interpreted as the initiation of a new bull channel, at least, it is not likely, or it is too soon to say.
The prevailing TTR or limit order market structure implies limited upside potential, with ‘scalping’ trades on the order of $5000 or less being a more realistic target for bulls and bears. This limit order market environment presents two primary approaches for traders:
- Remain Patient. Wait for the market to exhibit stop order market behavior, characterized by clear breakouts and sustained pressure on one side, before engaging.
- Adapt to the Range. Participate in the range-bound environment by adopting a contrarian approach. This involves buying low and near the bottom of bearish candles or selling high and near the top of bullish candles, essentially mirroring typical behavior of a trending market.
The majority of traders would be well-advised to remain patient and await a decisive breakout from the current trading range. The breakouts would signal a shift away from the range-bound conditions, offering clearer directional trading opportunities.
The Daily chart of Bitcoin
The daily chart continues to depict a trading range, reinforcing the idea that buying low and selling high remains the prevailing strategy within this market structure. We’re seeing bears attempt to establish a pattern of lower highs and lower lows. While their efforts haven’t displayed overwhelming strength, the bulls need to step up and close above recent lower highs to maintain the rationale for buying low.
Failure for bulls to push higher could indicate that bears are finding success selling at lower levels. This may attract more bears to short the market and decrease bullish buying appetite. If this imbalance intensifies, we could see downward pressure towards a significant support area – a Major Higher Low (MHL) that aligns with the psychologically important $50,000 round number and a previous breakout point (BOP). While it’s too early to tell, this scenario is worth close monitoring.
Thank you for reading our Bitcoin Weekly Report! We’d love to hear your thoughts and insights on the market. Please share your ideas in the comments section below, and feel free to spread the word about our reports to others who might be interested.
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