Market Overview: Bitcoin
Last week, we analyzed Bitcoin‘s November close, which settled below the significant $100,000 level. This week, history was made as Bitcoin surpassed $100,000 for the first time on Thursday, December 5th. The $100,000 mark acted as a strong magnet for price action throughout the week, demonstrating its psychological and technical importance.
With December being the final month of the year, Bitcoin has already posted a remarkable 135% gain from its 2023 close. This year marked a milestone for Bitcoin’s commercialization, driven by the launch of Bitcoin ETFs. Big institutions, likely to preserve their winners until year-end, could further support prices gravitating around or above the $100,000 level.
Bitcoin
The Weekly chart of Bitcoin
The weekly chart reveals a bull breakout from a six-month trading range between $50,000 and $70,000. The decisive breach above the March 14 all-time high signified a market cycle shift, propelling the price toward $100,000.
Bulls anticipate this breakout transitioning into a tight bull channel or a small pullback bull trend, targeting the $120,000 level—a measured move projection based on the monthly chart.
However, Bitcoin faces formidable resistance at the $100,000 level. This confluence of resistance is marked by the psychological round number, the doubling of gains for positions initiated at $50,000, and the measured move target of the six-month trading range. These factors make $100,000 a focal point for profit-taking and cautious positioning.
Traders are also closely monitoring support levels, starting with $90,000 and $80,000. A more robust support lies at the breakout point of the six-month trading range near $74,000. In case of a deeper correction, the previous trading range itself, from $50,000 to $70,000, could act as a magnet, likely leading to sideways trading before any continuation of a hypothetical downward movement.
On a microstructure level, the current 4-bar bull micro channel showcases ongoing bullish intent. However, this week’s follow-through bar from last week’s High 1 buy setup lacks strong momentum, appearing as a doji with a small bull body. This signals that the setup may not have been fully utilized for buying. A better strategy may be buying during a retracement, below this week’s low or within the breakout region between $74,000 and $90,000, with invalidation below the six-month trading range low around $65,000.
The Daily chart of Bitcoin
The daily chart shows a spike and channel bull trend, with notable trading range characteristics. On Thursday, Bitcoin breached $100,000, spiking to an all-time high of $104,000. However, the sharp reversal following the spike raises the possibility of a major high formed, a possible higher high major trend reversal. This highlights bulls caution as they navigate near major resistance.
Traders who entered the bull breakout between $75,000 and $85,000 might hold as long as Bitcoin stays above medium-term supports, like the 20-day exponential moving average. However, scaling out, perhaps exiting at least two-thirds of the position, near significant resistance levels like $100,000 is a best practice. Re-entry can be considered if another bull breakout emerges.
Profiting on the downside in a bull trend presents significant challenges due to the inherent upward bias and the presence of aggressive limit order bulls at key support levels. Selling a pullback during a bear breakout can be a viable strategy if the bear breakout is strong.
Limit order bulls typically dominate support levels, using these zones to enter long positions or average down existing ones. These buyers reinforce the upward pressure and make it difficult for bears to sustain their positions. Furthermore, long-term holders may actively hedge their portfolios with puts at resistance levels or during perceived overextensions, adding another layer of market activity that can absorb selling pressure.
For bearish traders, engaging under these conditions is often a losing proposition due to the limited profitability window and the tendency of the price to revert to the trading range or resume the bull trend. The asymmetry in risk and reward for bearish setups in such environments makes them less attractive, unless the bear breakout exhibits strong follow-through and coincides with a broader trend reversal. In most cases, the downside move may be shallow and short-lived, further discouraging bearish activity and emphasizing the importance of caution and discipline in these setups.
Looking ahead, traders may anticipate a bear leg toward $85,000, although support at $90,000 could halt this move. A trading range between $85,000 and $104,000 appears likely, as traders rarely expect a bear trend immediately following a strong bull trend. A bull breakout beyond $104,000 could signal continuation toward the $120,000 measured move target, while a bear breakout might lead to a test of $74,000—the breakout point on the weekly chart.
Thank you for taking the time to read this analysis. Your engagement drives these insights, and we invite you to share your thoughts, strategies, and feedback. If you found this analysis valuable, please share it with fellow traders. Wishing you successful trades!
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