Market Overview: Bitcoin
Since mid-August, Bitcoin has shown signs of weak bulls. The bullish fervor that drove earlier gains has faded, prompting many longer-term bulls to exit their positions or scale back. However, on the daily timeframe, shorter-term bulls have been capitalizing on buying opportunities at strong bear bars, a strategy that has proven effective in the current market. This consistent buying on dips reduces the likelihood of a strong bear trend emerging in the immediate future, as buyers are likely to step in again, maintaining support.
Bitcoin
The Weekly chart of Bitcoin
This week, Bitcoin reversed higher from last week’s close, settling near the midpoint of the current candle with a bullish body. We’re coming off three consecutive bear bars, which isn’t what bulls want to see. That kind of streak puts pressure on long positions, and I’d wager many bulls trimmed their holdings or bailed entirely to manage risk. It’s a rational move when you see consistent selling like that; no one wants to get caught holding through a potential cascade.
That said, the market isn’t screaming always-in-short just yet. Bears have earned some stripes with those three bars, showing they can drive price lower for a stretch. But it’s not enough to call this a full-on bearish regime. They’ve done the minimum, sure, but the structure isn’t a clear short bias.
Zooming out, the bigger picture traces back to a bull breakout from a cup and handle pattern. Post-breakout, Bitcoin was in a proper bull trend, higher highs and higher lows.
But after that breakout, there was bad follow through. The market went sideways, which, as I flagged earlier, isn’t ideal for bulls. We noted a trading range was likely to form within 10 weeks, and this lateral chop fits the bill. Those three bear bars? They’re more likely a downward leg within that range than the start of a bear trend. In ranges, price swings between support and resistance, and this feels like a corrective move, not a trend reversal.
Bears face a tough setup here on the weekly. There are solid support levels below, think of them as magnets drawing price in. But those same levels are a trap for shorts. Buyers tend to show up at supports, ready to step in on reversals that can burn short positions. It’s a high-risk spot for bears.
Now, could this be a broad bull channel? It’s a reasonable case. In these channels, price often closes gaps between prior higher highs, and we’ve seen that here with the body gap filled. The market hasn’t breached the last major higher low, though, keeping it in a state that’s either always-in-short or flirting with it—a hallmark of broad bull channels where pullbacks are sharp but contained.
Prior breakouts were strong, suggesting buyers still outnumber sellers overall. We’re sitting near the 50% retracement of the last up leg, measured from its low to high. Traders love buying just below this zone in broad bull channels, and we’re close enough to make it a spot worth watching.
I’d consider dipping my toes in as a buyer here, targeting those pullbacks. But honestly, I don’t trade these setups myself. Broad bull channels are hard to master. It takes serious chops to navigate, so I’d rather wait for a cleaner shift into a new market cycle.
For now, I’m neutral on the weekly. The bullish structure holds, but a high level of price action skills are required to trade with such context.
The Daily chart of Bitcoin
On the daily, we’ve got two bear legs after a failed bull breakout from a trading range. The breakout tried to punch higher but got rejected, leading to two clear downward moves, each with lower highs and lows.
I’m calling these legs, not a bear trend, because the gaps between lower lows and highs have closed. In a strong bear channel, most gaps stay open as price trends down with conviction. Here, the closures—check the body gaps marked in green rectangles on the chart, signal mean reversion, not trend behavior. That’s textbook trading range action, where price swings back to equilibrium rather than running one way.
In ranges, what looks like a bear channel is better labeled a bear leg. This one’s a complex two-leg pattern, with the second leg splitting into two smaller legs, adding some depth to the structure. It’s not uncommon to see this kind of nested correction in trading ranges.
After a two-leg move, the odds typically tilt toward a bull leg starting next. That’s the rhythm in ranges, price alternates after a couple of swings. But it’s not a lock. The market could just consolidate, forming a tighter range, which feels like the second most probable outcome right now. A bear trend? I think it is the lowest probability event.
We’re in a limit order market, with traders placing bids at key levels. I expect buyers to show up below the August low, defending that support. That said, the market could flip into breakout mode, making a bearish breakout easier to spot.
For stop-order bulls, a strong bull breakout would likely get their attention. They’d jump in, aiming for a second leg up, triggered by stops above resistance. That’s their playbook in setups like this.
The best trade so far has been buying strong bear bars for reversals and selling strong bull bars—classic limit order market stuff. Fading works well when traders are working in wide trading ranges. In hindsight, it is that easy. I did not have the right view on that. Now I see more clearly what is going on and feel more comfortable projecting scenarios.
Overall, expect either the start of a bull leg or breakouts to fail next week. If a bear scenario emerges, it will be hard to catch because buyers are expected to buy bear breakouts.
Hope you enjoyed the report, please engage in the comments section and share your thoughts!
Josep Capo
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