Market Video Report: Bitcoin
Duration 11:28 mins.
Summary
Bitcoin is facing a major bear trend or a major trading range. Within the report, we analyze the “Market Inertia” following a long-term bull trend and identify the key “Rule of Thirds” levels, targeting an equilibrium zone between $80,000 and $100,000, along with a specific trade setup involving a bear flag, explaining the Trader’s Equation, risk management, and why higher timeframe context is usually your best ally.
Transcript
Hi everyone, and welcome back to this week’s Bitcoin price action analysis. 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 Bitcoin on both the weekly and the daily charts. Let us jump right in and start by analyzing the monthly chart.
This week, the price created a strong bull bar. At the time of writing, what does that mean within the current context? To figure it out, we should acknowledge that, right now, we are either in a major bear trend or a major trading range. In the medium term, the market is definitely in a bear channel. However, because the market was previously in a very strong long-term bull trend, the natural transition after such a trend is into a trading range. Markets have inertia and they, more often than not, resist changing from a strong bull trend directly into an opposite, strong bear trend.
Trading ranges typically have a couple of legs testing both their upper and lower thirds, establishing an equilibrium zone within the middle third. In this specific case, the current bear leg can be viewed as the second bear leg within a developing trading range. We had one leg down here, a pullback, and then a second leg down there. Market inertia dictates that what follows a second leg down is a couple of legs sideways to up. There is a high probability of a test of the middle third of the trading range, which always acts as a strong magnetic pull on the price as the market searches for equilibrium.
In this case, I suppose the major trading range spans from approximately the $125,000 all-time high down to the $50,000 level. Right now, we are obviously trading within the lower third, and the ultimate area of balance—the middle third—would be between $80,000 and $100,000. So, that is exactly what I expect: the market testing the middle third of the trading range area at some point this year.
That being said, we formed a bear flag here, and the market is influenced by a bear trend as well. If I believe the price has equilibrium sitting above it, it is mathematically coherent for me to buy the low of the bear flag. The probability of this specific trade working is 40 percent. The stop loss is the bear flag’s measured move down which, as you can see on the chart, is below 2024’s August low. The target is twice that risk, around $90,000, which acts as a magnet since it is near the middle third of the upper bear flag—an area of equilibrium.
Therefore, to me, this provides a good trader’s equation for buying long. You might ask, “What about shorting? Isn’t there an 80 percent chance of a bull breakout failing in a bear trend?” But you must remember that in this case, I at least believe the higher timeframe is in a buy zone; when there is a context conflict, I always favor the higher timeframe. It is not 100%, but higher timeframes usually involve more money, and that makes their context more resistant.
This is a generic trade structure, and there are a lot of things you can do with these levels. For example, you can set an alert at the low of the bear flag; when it triggers, you move to a lower timeframe, like the 1-hour chart. There, you can wait for the market to become “always in long” and wait for a pullback to join the daily chart reversal with a higher probability of success.
Now, before jumping into the daily chart, I want to recommend that you learn how to read the market beautifully and in a fully independent way. If you want to do that, you can find a link in the description of this video to explore buying the Brooks Trading Course. For less than $500, it is one of the absolute best resources on the internet to learn how to trade. If for any reason you do not like the course, there is a 30-day money-back guarantee, so there is no excuse on your end.
Now, back to the charts, here we have the daily chart. This chart is in a trading range.
Last week, we discussed different ways to approach trading range price action. If you missed that report, I strongly encourage you to check last week’s Bitcoin video report. When the market is in a trading range, experienced traders basically look to fade breakouts of the upper and lower thirds of the range. On this chart, I have marked the thirds of the range for you: the upper third is this top box, the lower third is this bottom box, and in between, we find the middle third.
The middle third is clearly an area of agreement and balance. The market spends most of its time in a 50-50 state of uncertainty where both bulls and bears feel there is value, so no true mathematical edge can be found in the middle of a range. This is exactly why disciplined traders wait to see what the market does when the price approaches the extremes before placing a trade.
You have to remember that markets have inertia, meaning they tend to continue doing what they have just been doing. Because of this inertia, 80 percent of attempts to break out of a trading range fail. This means that only 20 percent of attempts succeed. However, trading ranges eventually extend and break out, and the longer the duration of the trading range, the more likely a breakout will eventually succeed.
Is there any way we can bet on a breakout during a trading range before entering too late, when the breakout has already gone? Indeed, there is. You can wait for the market to develop price action at the upper or lower extreme. Look at it this way: if the market consolidates and creates a tight breakout mode pattern right at the upper third of the trading range, that increases the chance that a bull breakout will succeed. It is no guarantee, but it is at least a short-term sign of strength. It tells us that institutional buyers are aggressively buying high, rather than only buying low, which is what they are normally supposed to do in a trading range.
Sometimes the price action pattern is clearer than others, and sometimes traders miss it simply because of a lack of flexibility. Al Brooks is very flexible, but he also has thousands of hours of experience analyzing charts. Therefore, it is perfectly fine for you to miss these things as long as you take notes and give your best to figure out how to not miss this opportunity in the future.
Ultimately, traders do not have crystal balls, and we do not need them. We are just playing a game of probabilities, constantly looking for a favorable trader’s equation before we risk our capital.
And this is all I got for you today. Thank you so much for watching the video, and I hope to read your thoughts in the comments. Moreover, you know we have a Discord channel, and if you tag me there I will happily try to answer your questions. I wish you a wonderful weekend and a good week of trading ahead!
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