Market Overview: Bitcoin
Last week, Bitcoin closed near its low, forming a bear signal bar within a narrow trading range on the weekly chart. However, this signal is not ideal due to the tight nature of the range. Currently, the price has entered the $55,000 zone, a buy zone for traders who believe the market is always in long based on the monthly chart. Monthly bulls are looking at the 20-month exponential moving average (EMA) as support and may enter positions with the expectation of a $10,000 to $20,000 up move, placing stops below the EMA.
Bitcoin
The Weekly chart of Bitcoin
The weekly chart reveals that Bitcoin is still in a trading range market cycle, characterized by relatively narrow price swings without significant breakout activity. This suggests that the current market is a limit order environment, where traders are more likely to buy at perceived lows and sell at perceived highs within the range. Such a market lacks the aggressive moves associated with stop order setups, with traders focusing on smaller profits from the extremes of the range rather than chasing breakouts.
The presence of over 20 bars of sideways movement suggests a balanced probability of a significant breakout in either direction. The pattern of lower highs within this range hints at the formation of a triangle, a common precursor to a breakout. This tight consolidation may create a breakout mode situation, where the market seems to be waiting for a catalyst to spark a larger move. Historically, a breakout from such a pattern can result in significant volatility, either to the upside or downside.
With the price hovering near a possible lower bull trend line, there is a chance that a contraction pattern, like a triangle, will form if the price stays above the previous major low. This could lead to a decisive swing in the future. In a limit order market, we expect buyers to step in around the $50,000 level, while sellers are likely to emerge near $70,000. The lack of a clear directional bias within the range reflects the reluctance of both bulls and bears to fully commit, making it a challenging environment for stop order traders.
Stop order bears view last week’s bar as a bear signal and anticipate a follow-through, while bulls are searching for a reversal setup, expecting a move towards the all-time high if the price rebounds from $50,000-$55,000.
In conclusion, the weekly chart suggests that traders should remain cautious, as the absence of clear setups points to a continued trading range. It’s essential to wait for clearer signals before making directional bets, particularly with the potential for false breakouts and reversals within this environment.
The Daily chart of Bitcoin
The daily chart indicates that the near-term market cycle is a tight bear channel, which may represent a bear leg within a broader trading range. This bearish channel, however, has not been favorable for stop order bears. Many of the bearish setups—bear bars closing near their lows—have been followed by neutral or bull bars, reflecting the lack of stop order trading behavior. This type of price action is common when trading within the middle third of a broader range, which has been the trading area of this week.
Currently, Bitcoin is trading within the lower third of the trading range, making this a more attractive zone for traders. Bulls are likely looking to buy near the lows of the range, while bears may be seeking to capitalize on a potential downside breakout. The key price level of $53,500, where some bears were trapped when entered below the July low, betting for a bear breakout, has become relevant. These trapped bears likely exited their positions when the price revisited this level, creating a support level expectation.
There are several possible ways to interpret the current daily chart patterns, as is often the case in trading ranges. One could view the current price action as part of an expanding triangle within the broader range, a bear leg within a trading range, or as part of a bear trending trading range.
Looking ahead, a strong bear move towards $50,000 or even $40,000 is possible, but it remains a difficult trade due to the broader market context, where higher timeframes do not appear strongly bearish. The most recent breakout in the monthly chart was bullish, suggesting that bulls may still have control in the larger market cycle. Since the monthly chart still suggests the market is always in long (or in the absence of it, is not always in short), traders might prefer to focus on bull setups in the current environment. These setups could include looking for a second or third entry within the tight bear channel, or waiting for the formation of a broader double or triple bottom.
Traders may also consider placing limit orders at key levels such as $53,500, $55,000, or the round-number support of $50,000. These levels offer potential entry points for those expecting a reversal within the broader trading range, with the possibility of catching a bullish swing back towards the range highs.
If you found this analysis valuable, feel free to share it with fellow traders, and join the conversation in the comments section as we navigate the complexities of this market together.
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