Market Video Report: Bitcoin
Duration 9:48 mins.
Summary
Bitcoin is likely in a major trading range a $50k–$125k range, targeting the $80k–$100k equilibrium zone. Despite a recent bull breakout, I maintain a short bias on most risk due to warning climatic behavior. I’ll buy if consolidation on daily holds or sell if the market reverses into an “Always In Short” after reversing from resistances.
Transcript
Hi everyone, and welcome back to this week’s Bitcoin price action analysis. My name is Josep Capo, and I am a Trader and an author for the Brooks Trading Course website. Thank you for joining us today as we take a look at Bitcoin on both the weekly and the daily charts. Let us jump right in and start by analyzing the monthly chart.
As price action traders, our first priority is establishing a broad market context before diving into the bar-by-bar nuances of micro-structure. Analyzing candlestick patterns in isolation is nonsense, candlestick pattern trading does not work; it is the surrounding market environment that provides them with meaning. With that foundation in mind, let’s analyze this week’s chart—starting with the macro price action narrative before zooming in on the micro-structure and specific trade zones or ideas.
Right now, we are either in a major bear trend or a major trading range. In the medium term, the market is definitely in a bear channel. However, because the market was previously in a very strong long-term bull trend, the natural transition after such a trend is into a trading range. Markets have inertia and they, more often than not, resist changing from a strong bull trend directly into an opposite, strong bear trend.
Trading ranges typically have a couple of legs testing both their upper and lower thirds, establishing an equilibrium zone within the middle third. In this specific case, the current bear leg can be viewed as the second bear leg within a developing trading range. We had one leg down here, a pullback, and then a second leg down there. Market inertia dictates that what follows a second leg down is a couple of legs sideways to up. There is a high probability of a test of the middle third of the trading range, which always acts as a strong magnetic pull on the price as the market searches for equilibrium.
In this case, I suppose the major trading range spans from approximately the $125,000 all-time high down to the $50,000 level. Right now, we are obviously trading within the lower third, and the ultimate area of balance—the middle third—would be between $80,000 and $100,000. So, that is exactly what I expect: the market testing the middle third of the trading range area at some point this year.
In previous weeks, I discussed structuring a long position by buying the low of the bear flag. Instead of dipping to trigger that level, however, price moved higher. This doesn’t bother me at all; I don’t care what the price does, only what I do with the price. Now, price has traded above the bear flag, triggering a bull breakout setup.
Since a bear flag follows bearish price action, a bullish breakout is the setup least likely to succeed, making it a “hard trade” to take. Instead, many traders prefer to sell above bear flags, as that is a higher-probability play.
What am I likely doing? As a trader who is active across various asset classes, I’m currently leaning toward the short side for risk assets. For example, most major US stock indexes are testing resistance in climatic bull breakouts, which are more often than not unsustainable. Consequently, I’m looking to short the breakout point. Still, as I will argue in the daily chart analysis, there are certain things that must happen first.
But before jumping into the daily chart, I want to recommend that you learn how to read the market beautifully and in a fully independent way. If you want to do that, you can find a link in the description of this video to explore buying the Brooks Trading Course. For less than $500, it is one of the absolute best resources on the internet to learn how to trade. If for any reason you do not like the course, there is a 30-day money-back guarantee, so there is no excuse on your end.
Now, turning to the daily chart: we have been stuck in a trading range since early February, but price is finally attempting to break above it. In a trading range, the standard play is to buy low, sell high, and scalp. What does that mean? It means traders are looking to sell the upper third or the major highs of the range and buy the lower third or the major lows.
Statistically, 80% of breakout attempts fail. However, once you’ve seen about four failed attempts, the probability of a successful breakout begins to increase. Currently, price is trading above the previous higher high. More importantly, it has left behind “consolidation footprints,” which indicate that on a lower timeframe, the market is in a healthy bull trend.
Does this guarantee the breakout will succeed? No. But it does mean the first test of the major higher low will likely be bought, making the immediate downside temporarily limited. We can conclude this by looking at the price action: bulls are profiting by buying above bars, while bears are failing to find profit when selling above them.
As we discussed in the weekly analysis, we have a “grey area” (a gap) and a “blue line” (the breakout point of a previous range) acting as overhead resistance. My plan? I would only look to buy these highs if the bulls can consolidate price action at current levels. If, instead, the price tests that resistance and reverses—flipping the market to Always In Short—I will look for a selling opportunity.
My target for a long position is between $90,000 and $100,000, as $90,000 is a major round number and represents the middle third of the previous range. If a short opportunity arises, my target would be between $65,000 and $70,000, which marks the middle third of the most recent range.
That is all I have for you today. I apologize if I was unable to answer all your comments recently or if my replies were late; it’s something I enjoy immensely, but I have been short on time over the past few weeks. Moving forward, I’ll have much more time to engage, so please leave your comments and I will read and answer all of your questions!
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Thank you, Josep — very insightful as always!