Market Video Report: Bitcoin
Duration 14:12 mins.
Summary
Bitcoin monthly January’s candle is an Outside Down Bar, closing near its low. This is a very strong showing for the bears. This marks the fourth consecutive bear bar. While the massive bear surprise in November arguably put the market in a bearish state, this follow-through in December and January confirms that, on this timeframe, the market is “Always In Short.”
Transcript
Hi everyone, welcome back to this week’s Bitcoin price action analysis. My name is Josep Capo, and I’m a Trader and an author for the Brooks Trading Course website. Thank you for joining us as we take a look at Bitcoin on the monthly, weekly and daily charts. At the time of this recording, we are just a few hours away from the monthly candle close. As you know, we dedicate one report every month to a deep dive into the monthly timeframe to gauge the long-term health of the market. However, before we dissect the monthly and weekly charts, I want to start our discussion with the daily timeframe.
The Daily Chart: Failed Breakouts and Range Dynamics
Over the past few weeks, we have been closely following an interesting technical setup on the daily chart. We saw what appeared to be a bullish breakout of a cup and handle pattern, which can also be viewed as a bull breakout of a defined trading range. Unfortunately for the bulls, the market failed to consolidate above that range. Instead, it reversed lower, leaving a bear gap in its wake. This is a classic “breakout failure,” where the price returns into the prigor range rather than finding new support.
As I mentioned in our last report, it is generally ill-advised to trade breakouts while the market is in a trading range unless that breakout originates from a failure at the opposite end. When a bull breakout fails as this one did, the most likely outcome is a test of the other side of the range. Initially, I suggested that fading the first pullback of that failed breakout was a high-probability scalp trade. Subsequently, I noted a high likelihood that the price would test the higher lows and even the lower boundary of the trading range. As we can see, that is exactly what has transpired.
Looking ahead, what are the market’s options?
- Stabilization: The price could return to the center of the trading range and stabilize. This would indicate a consensus among traders that the “fair value” or the area of highest participation remains within that gray trading range area.
- The Bear Channel: The alternative is a continuation into a sustained bear channel. For this to manifest, the bears need to consolidate and create a tight trading range below the current gray area. This consolidation would make a descending channel more sustainable.
We must also be aware of the potential for a climatic move downward, especially since there are significant levels on higher timeframes acting as magnets for price action.
The Weekly Perspective: Key Targets and Support Zones
Moving to the weekly chart, we are seeing a very strong bear bar forming this week, following a similar bear bar last week. In price action terms, a consecutive pair of strong bear bars can shift the market into an “Always In Short” conviction. After five to ten weeks of sideways movement, the market felt neutral; however, after these two bars, most traders now agree that the prior sideways move was actually a bear flag.
Interestingly, if you look to the left of the chart, you’ll notice an area where bulls bought very aggressively in the past. This historical buying pressure makes traders hesitant to sell aggressively right here, as it appears we are currently at the bottom of a major trading range.
If we define this as a trading range, where is the ultimate bottom? I have two primary targets in mind:
- The Gap Support ($75,000): There is a prominent gap between the trading range high and a major higher low. In professional trading, gaps are “action items.” Price tends to either reject strongly from them or blast through them with high velocity. Because the market has accepted prices above this gap for over a year, I believe there is a high likelihood it will act as support.
- The Apex ($65,000): The natural target for a range expansion is the “Apex” or the center of the prior structures. The $65,000 to $63,000 area also represents a 50% retracement from the all-time highs.
While the gap sits around $75,000, the distance to the apex is roughly $10,000. It is entirely possible for the price to reach the $65,000 mark. In my view, if the drawdown continues, this $63,000–$65,000 zone should act as the ultimate floor for this move.
Strategy Stock and Correlated Moves
I want to pivot briefly to a correlated asset: the weekly chart of Strategy stock. Their business model is essentially a leveraged Bitcoin treasury, using software cash flow and cheap debt to accumulate Bitcoin.
Note that Strategy stock has already undergone a bear breakout of its gap and has reached its Apex target. This serves as a leading indicator of what could happen to Bitcoin. However, Strategy stock is currently in a favorable position regarding probability and risk/reward. It is likely to either stabilize here or reverse. If Bitcoin finds its footing at its own gap area, this stock—acting as a leveraged play—could bounce significantly.
From a tactical standpoint, I am waiting for the daily timeframe to show signs of a trading range, a bull breakout, or a bull channel before “placing my bet.” When trading these wider timeframes, I often look at options income strategies. Specifically, I am studying the deployment of a Bull Put Spread (At-The-Money, approximately 45 days to expiration). As always, these are educational ideas for your study and not direct financial advice.
Educational Resources
Before we conclude with the monthly chart, I encourage you to visit the Brooks Trading Course website. It is an incredibly valuable resource for anyone looking to master price action. It includes:
- A comprehensive trading course with a 30-day money-back guarantee.
- A blog featuring analysis from professional traders.
- Live trading rooms for both the DAX and the E-mini S&P—perfect for seeing these concepts applied in real-time.
The Monthly Chart: The Long-Term View
Finally, let’s look at the monthly candle. With only hours left in January, the candle is shaping up to be an Outside Down Bar, closing near its low. This is a very strong showing for the bears. This marks the fourth consecutive bear bar. While the massive bear surprise in November arguably put the market in a bearish state, this follow-through in December and January confirms that, on this timeframe, the market is “Always In Short.”
However, we must keep the context in mind. This bear breakout is occurring within a much larger, long-term bull trend. Usually, when a bull trend ends, it transitions into a trading range rather than an immediate bear trend. This supports my theory that we are in a major weekly trading range rather than a total collapse.
For the long-term holders: The severity of the eventual recovery depends on how deep this fall goes. If the market reverses soon—perhaps testing $75,000 in February and recovering in March—the chart won’t look as damaged as it did during the 2017 or previous peaks. It would be a “standard” correction. However, if we break down to $65,000 and stay there, it may be a very long time before the bull trend resumes.
Thank you so much for watching. If you found this analysis helpful, please click the like button and subscribe. I value your input, so please leave a comment—I will be answering them through my personal YouTube channel account.
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