Market Video Report: Bitcoin
Duration 9:15 mins. AI is voicing Josep Capo’s original script.
Summary
Bitcoin triggered a bull breakout from the cup and handle pattern identified on the daily timeframe. The price now appears determined to test the critical $100,000 psychological level, as well as a key breakout point that of a previous bear breakout on the weekly chart.
Transcript
Hi everyone, welcome back to this week’s Bitcoin price action analysis. My name is Josep Capo, and I’m a Price Action Trader and an author for the Brooks Trading Course website. Thank you for joining us as we take a look at Bitcoin on both the weekly and daily charts.
Over the past week, I’ve been sharing my thoughts that we were on the cusp of a significant swing in the market. I mentioned that traders were positioned and ready to act on either a bullish breakout or a failed bullish breakout, anticipating a substantial $10,000 move in either direction. Well, this week, the price delivered an approximately $8,000 move, which brings us close to that expectation.
Now, let’s talk about why price action is such a powerful tool in our arsenal as traders. It helps us identify where and when trading opportunities might emerge. Even though we acknowledge that no one can predict the market, as price action analysts, we can anticipate how different future scenarios might play out based on how traders have behaved in similar situations in the past. And remarkably, we derive all of this insight simply by reading a candlestick chart. Isn’t that fascinating? It empowers us to make informed decisions without relying on guesswork.
To get started, let’s examine the weekly chart.
On the weekly chart, last week presented us with a Low 3 setup, which served as a sell signal for the bears who were eager to sell during a pullback and wager that this would initiate a downward move toward the $75,000 level. Remember, the overall context here is that the market has been confined to a tight trading range, or what we also call a breakout mode pattern, following a strong bear breakout.
In trading, strong breakouts like this typically lead to at least one additional leg—perhaps a small one—in the direction of the breakout. It’s similar to the aftershocks that follow an earthquake. For the time being, what we’ve seen instead is this tight trading range persisting over several months. This development favors the bears for a few key reasons. If there weren’t sellers willing to sell at these lower levels, the tight trading range wouldn’t have formed in the first place, and the bulls would have pushed the price back above the $100,000 level, which acts as a critical line in the sand on higher timeframes. So, right now, we have bears who are quite eager to sell low.
That said, the bulls are also eager to buy low, which explains why we haven’t seen a meaningful or discernible leg down following that initial bear breakout. So, how will this tension between bulls and bears resolve? As I’ve emphasized before, price action traders don’t claim to know the exact outcome—does anyone truly know? But what we do know is valuable: we have insights into how the market is likely to develop if there’s a breakout upward or downward.
On the downside, there’s a substantial support level that I’ve detailed extensively in my most recent report, published on January 4th. The $75,000 area represents this huge support, and if the price dips down there, it’s likely to fail in breaking through and instead rebound back to the current tight trading range. This is precisely why bulls are buying at current prices—they perceive limited downside potential, making it a relatively safe entry point in their view.
However, the upside isn’t particularly promising for the bulls either, because any upward movement would have to confront the previous breakout point. Above $105,000, there are numerous trapped bulls, meaning positions that got caught on the wrong side of the move. As a result, the price is likely to encounter significant resistance there and struggle to advance much higher, probably falling back once again to the current tight trading range.
In summary, we don’t know which direction the market will break first, but we do have a clear understanding of how it’s likely to react in either case. More importantly, if the price moves downward, for instance, and we observe that sellers remain eager to sell low, that could shift our perspective entirely. But based on the current setup, I’ve just outlined what I believe is the more probable path forward. When something unexpected—that is, something we deemed less likely—actually occurs, the wisest approach is to exercise patience until a new range forms. That range would then represent fair prices, making it easier for us to develop sound new theses grounded in the updated price action.
Even more crucially, by understanding what’s unfolding on a higher timeframe like the weekly chart, we gain a significant edge when trading on lower timeframes like the daily or 4-hour chart. In those cases, we might not need to dissect the price action in exhaustive detail; instead, we can focus on spotting entry patterns that align with our expected move from the higher timeframe.
Sometimes, the lower timeframe even provides the subtle hints we need to anticipate when a development on the higher timeframe might materialize. For example, just last week, I pointed out that the daily chart was poised for either a successful bull breakout or a failed bear breakout, which could kick off the larger moves we’ve been discussing. The daily chart appeared bullish overall, and therefore, that Low 3 setup we saw on the weekly was actually a poor sell signal bar. This turned out to be an accurate assessment, and any bear who sold based on that Low 3 is likely feeling disappointed now, especially if this week closes above its midpoint.
Now, let’s shift our focus to the daily chart, as it’s particularly intriguing in terms of price action right now.
Last week, I discussed the possibility of a cup and handle pattern forming. At that point, the handle hadn’t fully developed yet, but I anticipated that bulls would test back to the previous bull breakout high. This expectation stemmed from the strength of that bull breakout, where buyers stepped in aggressively at the close of the bar and the close of the highest bull bar—actions that made solid trading sense. I noted that this test could lead to either a successful bull breakout, resulting in another leg up, or a failed bull breakout followed by a bear breakout downward.
As it turned out, the price did return to the high of that bull breakout, thereby confirming the completion of the cup and handle pattern. By trading above the handle, this action triggered the setup, meaning there’s now an active pattern in play on this chart.
For the bulls to succeed here, what do they need? Primarily, they need the price to hold steady. This isn’t likely to manifest as a strong, explosive breakout, but rather as some form of slower, more gradual trend if it resolves to the upside. And for that to happen, any pullbacks must hold firm without breaking down significantly.
Currently, we’re observing that after the bull breakout of the handle, the price has pulled back. It’s now critical for the bulls that this pullback doesn’t deepen further. Specifically, if the price trades below Friday’s low, it should quickly recover and move back above the $95,000 level to maintain bullish control.
If the bears manage to push the price lower from here, that would indeed create an opportunity for them. I suspect many bulls have entered positions in this area, and if bears succeed in driving the price down, those bulls will be forced to exit their trades, generating additional selling pressure. However, until we see clear evidence of bulls failing, I’m not shifting my focus to that bearish scenario just yet.
On the other hand, if the bulls can sustain the price above $95,000 and establish higher lows, one of my preferred strategies comes into play: buying a half position at higher highs and another half during the pullback—perhaps around $2,000 below the highest high in the trend, assuming the bears don’t appear particularly strong. This approach allows me to align with the dominant thesis while ensuring I don’t miss out on a strong move if it accelerates quickly. At the same time, it prevents me from buying at an excessively high price if the trend turns out to be slower and more methodical. I recommend keeping this in mind as you design your own strategies: building positions with a focus on trade and risk management is far more important than pinpointing the perfect timing. It helps preserve capital and maximize opportunities over the long term.
I’ve outlined targets for the bulls on the chart, which are based on measured moves derived from the height of the handle, the height of the breakout, or the overall size of the full cup and handle pattern. These provide logical objectives where we might expect profit-taking or reversals.
In the event that this bullish scenario fails, I don’t anticipate the price simply retreating to the previous range. Instead, it would likely test the $75,000 area, presenting a great opportunity to short. I wouldn’t hesitate to take that trade, as it aligns with the broader context we’ve discussed.
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