Market Overview: Bitcoin
Bitcoin is reversing up from a bear ioi sell signal on the weekly chart. Both the Bulls and the Bears are active. The Bears sold a Bear Breakout of the Bull trend line. But the Bulls were trending during the year, and until proven wrong, Traders should suppose that the Bears will eventually fail; However, we will probably see another low before there is a new high, even if the Bear ioi setup fails.
The logarithmic Weekly chart of Bitcoin spot
Past: Supports and Resistances
- The price did a Bear Breakout of a Trading Range formed between early 2021 and early 2022.
- Major Lower High.
- Bear Flag Breakout Point.
- Then, the price continued to trend down within a bear channel until it reached strong supports and formed a reversal pattern: a HSB.
- 2022 Low.
- Right Shoulder Low.
- The Right Shoulder Low was followed by a Bull Breakout:
- HSB Breakout Point.
Present: Market Cycle
- Recently, there was a Bull Trend.
- That Bull Trend might be over, but before a Bear Trend is apparent, the price will likely transition into a Trading Range first.
- Traders will likely buy the first reversal down from a Bull Trend.
- A Bull Swing might emerge.
- If the price doesn’t fall and keeps reversing up without first liquidate weak Bulls (bull’s stop loss), it might not have much upside potential since those Bulls will take profits (sell) around the Double Top, and that will add selling pressure.
During the past report, we have said that selling below the bear ioi sell setup without good bear follow through.
- They see a Failing Bear ioi.
- However, this week’s bull reversal bar is not a strong bull signal, nonetheless, the follow through bar will give more insight.
- Bulls see that above the 2023 highs there are bears that will buy, however, the upside potential will be higher if weak bulls are erased from the equation, by stopping them out, either below the June’s low, or March’s low.
- If the price falls to the weak bulls Stop Loss will mean that both Bulls and Bears are selling: that is a crowded trade.
- The Bulls want then a reversal up from the higher lows.
- They see the Failing ioi, but they are ok with that because the price comes from a Bull Trend, and then, they want to sell higher. The probability is low, but the risk it is also low, specially compared to the reward.
- They want a reversal down from the highs, preferably before the price erase the Bulls by trading at their Stop Loss orders.
- Since the Bears are not dominating, that would be a low probability trade, so the reward must be higher than the risk.
The Daily chart of Bitcoin futures
Past: Supports & Resistances
- There was a Bull Breakout.
- Bull Breakout Low.
- Then, the price went sideways, forming a Tight Trading Range that broke slightly to the downside.
- Tight Trading Range High (2023 High).
- Moreover, the price entered an endless pullback until did a Strong Bear Breakout. After a Strong Bear Breakout, we expected a Second Leg Sideways to Down:
- Bull Trap and Lower High.
- After the Bull Trap and Lower High, the price did a new Low of the trend.
- Bear trend line.
Present: Market Cycle
- The price is within a Bear Channel. The last three times that the price broke above a minor high, it ended up reversing down, stopping out the Bulls.
- Still, the price is above the Bull Breakout Low, that is support.
- The Bears need to test and consolidate trading below the Bull Breakout Low to demonstrate that this is a Bear Trend and not a 2 Bear Legs in a Trading Range.
- Because the market has been Trapping the Bulls, and then stopping them out (sell orders), it will possibly trade down to the Bull Breakout Low, where most of the sell orders rest.
- Bears are dominating, they are not being stopped out. A shift from a Bearish bias to a Bullish bias requires trading above the major lower high and stop out the Bears.
Traders wonder if the price is going to trade down towards the Bull Breakout low before stopping out the Bears. Trading above the Major lower high is also stop out the shorts of the weekly bear ioi sellers.
- They want a Bull Breakout of the Bear trend line but more, they want to erase the Bears from the equation by trading at the major lower high. Then, they will look to buy a reversal down from there. (Trading Range Buy Low and Sell High)
- Or a reversal up from the Bull Breakout low. Many Bears will think that this is a Bear Trend and would want to join the Bear Trend, while Bulls would also sell (Stop Losses). The result might be a bear crowded trade, and bulls will like to buy a reversal up.
- Bears think that the price will trade towards the Bull Breakout Low, and hence, they want to sell a reversal down from the top of the Bear Trend line.
- They will sell below decent bear bodies after a there is a reversal down.
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