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Bitcoin Breakout Mode

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Market Overview: Bitcoin Futures

Bitcoin breakout mode and inside bar on weekly chart. The price increased its value by +0.71% during the week. Traders wonder if this is the beginning of a small pullback bull trend or if a bear leg and test down to the 2022 low is about to start.

Bitcoin futures

The Weekly chart of Bitcoin futures

Bitcoin Breakout Mode and Inside bar on Weekly Chart

Analysis

  • This week’s candlestick is a bull reversal doji and an inside bar. This bar occurs within a Tight Trading Range, which is also a Breakout Mode pattern.
  • The pattern that dominates the chart is a Head and Shoulders Bottom (HSB).
  • Price is now deciding whether to continue towards the HSB Measured Move up (HSB MM) or break down the Bull Channel and go back into the range (HSB).
  • A Breakout Mode pattern, it is also a Tight Trading Range. This Tight Trading Range occurs after a bull breakout, so it has enough momentum either to break up or down soon.
  • The price favors slightly a bull breakout since bears could not close the 2/16 gap and because the price is within the bull breakout of the HSB inertia.
  • Nowadays, the different participant’s perspective might look something like this:
    • Bulls:
      • They think that the HSB is going to lead the price to a MM up. At that point, traders will observe if there is profit taking or if the price is instead within a small pullback bull trend.
    • Bears:
      • They believe that there will be buyers giving up at around the 50% retracement of the tight bear channel and hence, that it will provoke a bear leg that will try to test, at least, the major higher low.
  • A Breakout Mode Pattern has 50% of breaking in either direction; but since this week the bull reversal bar denotes buying pressure and thus, bears failing to get new lows, the odds of a bull breakout and continuation of the bull trend is more likely next week.

Trading

  • Bulls:
    • It is a good stop order bull setup. It can be viewed as a High 1 if counted from the latest high, or as a High 2 if viewed as a Double Bottom of the previous “ioi” pattern from some weeks ago.
      • Some traders will place their stop at the major higher low, others will use last week’s low or put the stop below the low of the outside bar of the “ioi”. Their target is getting to the Head and Shoulders Bottom and Measured Move.
  • Bears:
    • They can sell below the bull doji bar as a Low 2, but it is a bull bar, and it is much better for them to wait and sell below a bear bar closing below its midpoint. Their goal is getting to the major higher low.

The Daily chart of Bitcoin futures

Bitcoin Daily Bull Breakout of Triangle

Analysis

  • During the week, the price reversed up strongly after a strong bear breakout bar.
  • The patterns moving the price are a Triangle within a Head and Shoulders Top (HST), that happens after a bull Breakout.
  • The strong bear breakout bar on Monday created the right shoulder of the HST. But then, during the week, bulls reversed up, and a Triangle was formed. And then, Friday broke above the Triangle.
  • Nowadays, the different participant’s perspective might look something like this:
    • Bulls:
      • Bulls want the bull breakout of the Triangle to succeed and drive the price towards a MM up. They will need good follow through on Monday to increase their chances of success.
      • Their main goal is to stay within a bull channel and ultimately get to a MM based upon the prior bull breakout.
    • Bears:
      • Bears want a failed bull breakout of the Triangle. They need to put the price below the 20-day Exponential Moving Average and then a break below the HST.
      • Ultimately, they want to get to the bottom of the bull breakout and demonstrate that the price is within a trading range and not within a bull channel.

Trading

  • Bulls:
    • They can buy reasonably above Friday’s bull signal bar, or better, buy above the April 27th high. Their protective stop at the HST sell signal bar. Their objective is to get to a MM up of the Triangle or the failed HST.
  • Bears:
    • They can reasonably sell at the HST sell signal bar. Before that there might be a bear bar on Monday and hence, it creates a Double Top with April 27th high and a failed bull breakout of the Triangle setup. Their protective stop would be either the HST high or above the April 27th high.

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