Market Overview: Bitcoin
Bitcoin is doing a Bull Breakout Weekly Bar that reflects our expectations from last week’s report. The daily chart was more likely to initiate a Bull Leg and this is why we are seeing a Bull Breakout Bar on the Weekly chart.
Bitcoin
The Weekly chart of Bitcoin
The weekly chart displays a clear bull trend market cycle, currently in a pullback from the second leg of the ongoing uptrend. This correction sets the stage for a developing third leg. In bull trends, third legs represent the mid-stage of a cycle, where momentum remains robust. Fourth legs typically signal late-stage consolidation, while fifth legs often indicate exhaustion, with diminishing returns on upward moves.
The bull channel is moderately paced, neither excessively wide nor overly constricted. Recently, bears did three consecutive bear bars, successfully closing a body gap formed during the second bull leg highest close. Wider trends, measured by the spread of weekly tend to weaken faster, resulting in fewer legs, tighter trends have more legs. The current channel’s moderate width suggests resilience but warrants caution.
Price action has since reversed upward, with the current week forming a bull bar. Within the bull channel, bulls maintain an “always in long” stance, supported by the structure holding above key support levels. Bears, while impactful with their recent sequence of bear bars and gap closure, lacked sufficient momentum to establish an “always in short” market. Their efforts have introduced skepticism to the bull thesis but fall short of overturning it.
As a trader favoring breakout entries or buy-high/sell-low strategies, I would likely have exited long positions during the pullback, securing modest profits. This approach aligns with capturing gains at structural highs while avoiding drawdowns in consolidative phases. However, it makes sense to buy low for bulls that are comfortable with this style. They may enter at the moving average, a 50% pullback of the second bull leg, or below lows of recent bear bars.
For bears to shift the market decisively, they must establish an “always in short” structure, marked by sustained selling pressure and closes below the bull channel’s trend line. Without this, the mid-stage cycle dynamics favor another upward leg likely pushing Bitcoin to a new all-time high before year-end.
Bears currently face low odds of success, though their probability has risen slightly after closing the body gap compared to earlier in the cycle. A pullback within the third bull leg would increase reversal risks, as mid-cycle corrections in broader channels often attract selling pressure. However, reversals remain low-probability trades, and it is preferable waiting for a confirmed “always in short” setup before initiating shorts. A test of $100,000 is possible.
Breakout-oriented bulls may find opportunity in a bull breakout from the current structure. Historically, buying all-time highs and exiting below a mid-term moving average has been effective, though in this context, buying low—near support or moving averages—offers a more favorable trader’s equation. Over time, Bitcoin is likely to evolve into an asset better suited for buy-low strategies, as outlined in our special report from late 2024. This shift suggests that high-entry breakout trades may lose efficacy in the coming years as volatility stabilizes and institutional participation grows.
The Daily chart of Bitcoin
On the daily chart, the market cycle is a bull breakout in its early stage, driven by a reversal from a wedge bottom and a breakout above a triple top or triangle pattern. This move occurs within a broader trading range. The bull breakout’s origin from the range’s lower boundary reduces its probability of sustained success compared to bull breakouts from range highs (in late stages of the trading range), as mid-range buying often encounters selling pressure from bears trading at fair price.
Pullbacks in bull breakouts from trading range lows tend to be larger than those from range highs, reflecting the increased supply at these levels. In the current setup, traders may find better entries using limit orders, such as at a breakout retest or below a recent bull bar low, rather than buying at the close, which risks larger pullbacks.
Bears aiming for a downward reversal face challenges in initiating quick swing shorts, given the bull breakout’s momentum. Their optimal strategy involves waiting for an “always in short” market, where a structured sell setup emerges for a significant second leg down, measured from the prior bear channel spanning the all-time high to August or September lows. Alternatively, bears could target high sells during a weakening second or third leg up, looking for “low 2” or “low 3” setups—consecutive tests of resistance in the upper third of the trading range—where fading rallies offers a structured entry for a move back to range support.
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