Market Overview: Bitcoin
On the weekly chart, Bitcoin continues within a Breakout Mode Pattern (BOM) that follows a strong bull breakout from an 8-month Trading Range that had developed over the past year. On the daily chart, a BOM pattern that formed at the top of a trading range has already broken to the downside.
Bitcoin
The Weekly chart of Bitcoin
This week, Bitcoin’s price action remained within a tighter trading range, consolidating inside the previous weekly range. The result was a doji bar, indicating a state of indecision in the market. A doji bar is not a strong buy or sell signal, reinforcing the idea that traders are waiting for a decisive breakout. Since Bitcoin is currently in a Breakout Mode Pattern (BOM), the critical buy and sell signals will come from a confirmed close above or below the pattern.
Historically, Bitcoin has favored bullish breakouts over bearish ones. When Bitcoin breaks out to the downside, it is often driven more by bulls exiting positions or hedging rather than a surge in genuine bearish sentiment. On the other hand, bullish breakouts have consistently performed well, largely due to Bitcoin’s perception as an asset with long-term growth potential, backed by its limited supply and potential demand.
Bitcoin remains within the BOM pattern, which continues to define near-term price action. A BOM pattern following a bull trend typically leads to one of two scenarios: either a bullish continuation, where the price resumes its uptrend, or a bearish reversal, signaling a potential downtrend.
At present, Bitcoin is trading in the middle of this range, meaning traders are closely watching for a breakout. The major price magnets influencing market movement on the downside are: the Weekly Breakout Point of the previous trading range; the gap between the initial bull breakout bar and the follow-through bar, which serves as a support zone where buyers may step in and where bears might cover short positions.
On the upside, key targets remain in play. The first major technical objective is the measured move based on the height of the BOM pattern. Before that, the Bitcoin spot price chart suggests a measured move, with the 2021 drawdown height measuring to targets exceeding $120,000. The measured move projection derived from the BOM pattern itself has a potential price level of $130,000.
As always, Breakout Mode Patterns suggest an approximately 50% probability of breaking out in either direction. Given Bitcoin’s historical tendency toward bull breakouts. The prevailing strategy involves either accumulating near key support or entering long positions only after a confirmed breakout above the BOM pattern.
The Daily chart of Bitcoin
In this week’s price action, Bitcoin has been trading within a tight range, showing indecision as traders await a breakout. On Wednesday, a bullish signal emerged that could be interpreted as a double bottom. However, the lack of strong follow-through, coupled with Friday’s close below Wednesday’s high, has cast doubt on the signal’s strength. Additionally, Friday’s price action could be viewed as forming a double top with the previous Friday’s high, further reinforcing the sideways movement.
This overall price behavior suggests that Bitcoin has not yet chosen a definitive direction. The continued consolidation could eventually form a Major Pattern, as the Major Trading Range is contracting and may eventually form a Triangle. This contraction phases often precede significant breakouts, creating new opportunities for traders.
From a bearish perspective, the bear setup of the Breakout Mode Pattern (BOM) remains valid, as Bitcoin has not invalidated the downward structure. Bears who entered short positions remain in profit, keeping downward pressure in play.
In previous reports, we analyzed trading opportunities within the context of a BOM forming at the top of a Trading Range. Such patterns are significant as they provide low-risk, high-reward setups at critical chart locations. A typical BOM pattern presents four main trading strategies:
- Bull Breakout: Close above BOM’s high.
- Bear Breakout: Close below BOM’s low.
- Failed Bear Breakout: If the price initially breaks downward but then reclaims the BOM high, forcing bearish traders to cover their positions.
- Failed Bull Breakout: If the price breaks upward but fails to sustain, eventually reversing toward the BOM low.
The current remaining possibilities are: Bear Breakout, which is active, or Failed Bull Breakout, which would happen if price trades to the BOM high before reaching bear targets.
The target projections for these scenarios aim for 2R to 3R returns, meaning traders look to achieve profits two to three times their risk per trade. These targets align with broader upside and downside magnets identified in the weekly analysis, maintaining consistency across multiple timeframes.
We encourage you to share your thoughts, insights, and experiences in the comments section below. If you found this report helpful, consider sharing it with fellow traders so we can continue to grow together.
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Josep hey,
Thanks for the detailed report and great analysis!
To my humble opinion the BOM on the daily chart is not yet in place assuming you agree that the start of the trading range is the top of the wedge 3rd leg up. I think that what you have marked on the daily chart as TR zone is an embedded TR structure within wider TR.
Thoughts?
Hi Eli! Thanks for your thoughtful comment and for engaging with the report!
I see where you’re coming from regarding the BOM and the embedded TR structure. Being flexible with patterns is key because there will always be buyers and sellers positioned above and below prior highs and lows. Minor highs and lows, they always present a two-sided risk—either leading to a reversal or fueling a continuation.
When we get tight sideways action near the top of a trading range, traders often look for a breakout above that range since the stop placement is tighter and there is a higher sense of security, compared to buying during a bull trend.
For this week’s chart, I’ve returned to the spot chart, which I think we will agree. The breakout mode pattern from the IBIT ETF isn’t as clear as the contraction pattern the spot is forming—a triangle.
Curious to hear your thoughts on this! Always appreciate your perspective.