Market Video Report: Bitcoin
Duration 24:17 mins.
Summary
Bitcoin price action shows a weekly bear reversal, breaking a bull micro channel after shifting the short-term market direction to “always in long”. The analysis expects a “second leg” up, magnetized by the $90,000 level. Traders initiating long trades may use smaller position sizes and be prepared to exit early if immediate action is unfavorable, since the price is facing a resistance.
Transcript
Introduction: Hello everyone and thank you for watching the Bitcoin Report. My name is Josep Capo and I am a trader and an author for the Brooks Trading Course website. Thank you for joining us today as we take a look at both the weekly and the daily charts.
- Weekly Chart Analysis: Here we are looking at the weekly chart of Bitcoin through the Coinbase exchange quotes. And as we can see we have been doing a bull micro channel—one, two, three, four, five, six—a bull micro channel that this week was broken. And finally, there is a week that is trading below the previous week’s low.
- Market Direction Shift: What’s important to note is that this bull micro channel changed the “always in” direction which was previously “always in short.” Now after such bullish strength or pressure, the market has shifted, at least in the short term, to bullish.
- Historical Context and Gaps: Now we have been discussing throughout the previous weeks that we were in a bear channel and that the market was strong and we were facing resistances at the breakout point from the previous bear flag and also through this area with very little price development, which is an area that we also call a gap. This is an area without much participation where the price normally either rejects quickly or goes through quickly. Well, it looks like it did both things.
- Implications of Reversal: But we want to know the implications of this week’s bear reversal because this week we are seeing this red candle that is reversing from highs and is closing—or at least at the time of recording this video—it’s around the low of the candle. The candle alone looks like a strong bear bar. And we want to know what are the implications of this bear bar in relation to this shift of the market to “always in long.”
- Market Scenarios: As always, we are not going to say this thing is going to happen now because this is not how the market works or how analysts work, but we will try to think through different scenarios that we can witness from here that will help us maybe draw the next trading decision.
- The Second Leg Strategy: Now normally after a strong bull micro channel, we are going to look for a second leg. This second leg is a very typical strategy that many Brooks price action traders trade and are making a living from trading breakouts because this is a breakout. But any breakout needs good context to work.
- Bulls’ Arguments and Magnets: Is it clear that we are in a very good environment for the bulls? I think there are arguments to claim that. We have been talking for many weeks about the main magnet of this chart that I claim is around the $90,000 level because it’s in the middle of what I think is a major trading range between $90,000 and $100,000, which is a major psychological level. I believe that there are a lot of participants willing to trade around there.
- Price Gravitation: The price always wants to trade where the most volume will be traded. Participants already know that the price has been gravitating since late 2024 around these prices. So I believe that the bulls can argue that this is going to bring a second leg up.
- Trading Setups: If we isolate all this price action from the left and we are only looking to this price action here, I wouldn’t say the same; I would be very hesitant to take this trade. One setup for a trader that wants to trade a bull micro channel would be placing a buy below a good bull bar like the current prices. The stop loss goes below there and the target will depend. If you want a one-to-one ratio, that means the probability of success will be around 60%.
- Position Sizing and Resistance: You can trade by starting your position size smaller, for example. If you think this bearishness is something you don’t want to face too much but you want to engage because of the magnet above, it’s reasonable to look for engaging by starting with a smaller position and seeing what happens. It’s a good reason to start small because we are facing resistance here and these resistances are important; bearish pressure in the past was huge there and the price did not go through directly to the upside.
- Bear Strength and Risk Management: Still, I think that bears have not done enough to sell here. If my thesis is correct and this area above is a huge magnet, then I think bears may not be in the best place to initiate a trade. If the next week we have another strong bear bar, that would be two strong bear bars, which could be enough reason for someone who initiated a long position to exit way before their stop loss. In my case, I will probably try to exit if the next week is a strong bear bar.
- Probability Game: This is how this business works; we are in the probability game. There is no certainty in the next trade, and that is a very good thing for any trader to remember as we think in the long term. I am concluding that it is reasonable for anyone trying to structure a long trade here to target these upper levels, but they should be aware they may have to exit early if the price proves them wrong.
Live Trading Workshop: We are moving to the daily chart, but first, I would like to remind you that we are going to Macau for a live trading workshop. You will have the opportunity to see how professional traders trade. I was lucky enough to be in Orlando this past October and it was a boost to the trading journey. You get to know professional traders such as Al Brooks and Tom Hougaard, but you are also going to see trading from Louis Wang, Tim Stout, Price Action Rose. Tim Fairweather and Richard and rest of the team will also be there to give you the best trading experience possible. For more information, visit the Brooks Trading Course website and the blog.
Daily Chart Analysis: On the daily chart, bulls have been doing a great work; we see a kind of small pullback bull trend. Some friends tell me a small pullback trend doesn’t have climatic bull bars, which is a warning, but the truth is bears have been failing over and over. The market has been accepting higher prices from the previous trading, meaning there is some value migration.
Market Nature: Bears want to sell high and bulls want to buy low. In trading ranges, which exist 80% of the time, bulls are not buying high and bears are not selling low. When the price accepts higher prices, it means bulls think this is low and there is a change in value perception, which is bullish.
Trap Bulls: If bears can create enough bear pressure, bulls that bought the high will be disappointed and become trap bulls. You have to acknowledge there will be traders that will sell there to get out of a bad trade. This information is useful because we know how participants will behave based on how they are positioned.
Expectations for Breakouts: If there is consolidation and higher acceptance, I expect the bear breakouts of bull flags to fail 80% of the time. A 20% scenario doesn’t happen frequently, but it’s something you see every month depending on the time frames.
Support and Resistance: I don’t think it is good for bears to sell here even though you can argue for a double top or major trend reversal. There should be support because traders were accepting to buy here. If you start to see bears get strong and quick, bulls may be liquidated, but I don’t think that will be the case because there was a trading range on the left and the price normally doesn’t move quickly through those.
Conclusion: Last week we discussed buying above the gray area and waiting for follow-through, which never happened. Now I believe bulls will buy lower. The target for the bears is the apex or middle third of the previous lower trading range; they may achieve their trade, but I would not bet that this is the beginning of the move. That is all I have for you today. Thank you so much for watching.
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