Bitcoin Weak Low 2 after Strong Bull Leg

Market Overview: Bitcoin

Bitcoin triggered a Low 2 setup on the weekly chart. The Low 2 setup is also the Handle of a Cup and Handle Pattern.

Bitcoin

The Weekly chart of Bitcoin

• In 2024, Bitcoin spent approximately 8 months in a trading range.
• Price broke out above the range’s high and completed a measured move up.
• A double top pattern formed, followed by a sharp reversal in early 2025.
• The reversal included a large bear surprise bar, signaling the market entered an “always in short” phase.
• Based on the strength of that bar, a second leg sideways to down was anticipated.
• However, downside follow-through was limited due to:
  • A large tail below the close of the previous bar, indicating buying pressure.
  • Price action returning into the double top region before bear surprise and closing the bear breakout gap.
• Support was expected around the 2024 breakout point, which coincided with the 12-month moving average—a key confluence zone.
• The bear surprise occurred in a weak context for bears.
• Additionally, institutional rebalancing flows were expected around Q1 2025:
  • Price was nearly 30% down from the previous quarter.
  • This was likely to trigger dollar inflows, reinforcing the technical thesis.
• A legit High 3 setup formed, a classic pullback pattern.
• A few weeks later, a strong bull bar broke the 3-month moving average, flipping the market from “always in short” to “always in long”.
• Then the market fully recovered from the bearish drawdown.
• The price action completed a cup and handle pattern.
• Markets tend to resist behavioral shifts; once the shift happens, reversal is often difficult.
• This implies the first pullback in this new bull leg is likely to fail to reverse it.
• The market has since formed a sideways-to-down pullback, with:
  • A Low 2 setup forming last week.
  • The Low 2 triggered this week, but:
    • Given the strong bull leg context, bearish odds are weak.
    • The trader’s equation currently does not favor bears.
• Bulls aim for a bull breakout of the pullback:
  • There is a measured move target near $120,000 from a higher timeframe pattern.
• Aggressive bulls might buy the Low 2 using limit orders and scale in lower—potentially down to a 50% pullback, provided the context doesn’t turn hostile.
• However, a 50% retracement of the bull leg would:
  • Undermine the bull trend thesis.
  • Increase the likelihood of a trading range market cycle dominating.
• Currently, the market is in a tight bull channel:
  • It will either continue upward into a new bull leg or transition into a trading range.
  • Other scenarios are unlikely given current conditions.
• Bull strategies remain easier to execute than bear ones.

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The Daily chart of Bitcoin

• A spike and channel bull trend formed initially.
• Eventually, the lower trend line of the bull channel was broken.
• Despite the breakdown, a bear trend was not expected:
  • After strong bull trends, markets usually enter trading ranges, not bear trends.
• Currently, price is in a developed trading range, characterized by:
  • An initial bear leg.
  • A subsequent bull leg.
  • A current bear leg—forming a three-leg structure.
• 80% of trading range breakouts fail, suggesting:
  • A breakdown and measured move down from the third leg has low probability.
• A measured move down is being shown on the chart (based on the bull leg high), but:
  • It is unlikely to succeed.
  • Weak bears may still hope for it.
• Just below the current trading range low lies:
  • A bull breakaway gap (BO Gap)—an area bulls previously defended.
• The 30-day moving average is nearly flat:
  • Traders appear to be fading breakouts that deviate too far from this average.
  • That behavior is likely to persist.
• Bears lack any micro gap from the highs of the range:
  • While there is a body gap, subsequent sideways movement weakens its significance.
  • Thus, this bear leg lacks conviction.
• Key support levels under current price:
  • The $100,000 round number.
  • The breakout gap (BO GAP).
• If bears manage to close the breakout gap, it would:
  • Be a positive signal for them.
  • Help argue against bullish inertia.
• However, if that attempt results in weak bear price action:
  • The context would not support further downside.
• In trading ranges:
  • Buyers often step in below strong-looking bear bars, especially in the lower third of the range.
  • This is the case with Friday’s bar (at time of writing).
• Weekend expectation:
  • Price should either stay above this week’s low, or:
  • Retest it after test of $100,000.
• Next week’s outlook:
  • No large moves expected (~$4,000 range).
  • A strong trading range breakdown is not anticipated.
• Option strategy consideration:
  • Weekly expiration Bull Put Spread:
    • Sell put at $100,000, buy put at a lower strike.
    • Aims to capture premium, given low downside expectations before expiration.
    • Worth exploring under this current low-volatility, range-bound context.

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