Good Afternoon everyone,
after returning from some weeks of well-deserved holiday, it is now time to focus on the recent market developments and paint a refreshed picture of what is to come to the markets in the neartime future. This is the battle of 6k key level zone.
Although the cryptosphere has already erased a great deal of profits made in the run-up end of last year, markets do not seem to be out of the woods just yet. Recent market activities hasled to much confusion building up about what will be the future of the cryptosphere, especially in the short to mid-term run.
As both bullish and bearish arguments are valid as of now, I will focus on both and engage in discussion about either scenario.
Since peaking just shy of $20,000 in mid December 2017 $BTC lost around 70% value within just less than two months, locally bottoming out at $6k exact. Likewise, the rest of the sphere suffered similar consequences, sending the markets lower across the board.
When viewing the Weekly chart it becomes apparent that the shortterm bubble, which was the run up towards $20k, has popped. Whether or not we will continue generating higher levels of valuation in the future cannot be told from this fact alone. What is known however is that we must see a consolidation period which retests previous levels of support which sparked the 2017 rally in the first place. This movement can generally be measured by using the stages of a bubble theory which indicates that after every Mania Phase there is a Blow Off Phase following suit. Usually that means gains will be erased, new bagholders generated, while businesses that entered during the earlier hype will be put under pressure as prices are declining in the entire sphere.
During the previous bull run $BTC generated Higher Highs and Higher Lows consecutely until hitting the 20k mark, which resulted in a change of pattern - appearing with the first Lower High, getting confirmed with the following Lower Low. Technically this has become a short-term downtrend as Lower Highs, Lower Lows are being printed on the chart. The $6k level remains of paramount importance, a battle likely deciding the fate of BTC for the upcoming months, as the $6k level is the last Lower Low, which means that bears will try to generate another Lower Low to fully confirm that we move towards a more prolonged bear market.
However, the occurence of the first Higher Low in this yet short-term bear market disrupts the bearish view somewhat. The Higher Low formed at $6400, when markets tried to retest the $6k Low we printed earlier, but failed to generate new Lows for the time being.
If we have a closer look at the 3d chart, it clearly shows the pattern in more detail with consecutive Lower Highs & Lows formed until disrupted by the $6400 Higher Low, meaning we now have reached a Lower High - Higher Low decision point, which in turn means that…
… any new High above $9990 would mark the continuation of the major uptrend that topped out at 20k and would also indicate this was solely a corrective move while the uptrend is still intact. We would then have Higher Lows & Higher Highs = uptrend+ solid support at $10k underneath:
… any new Low below $6425 would mark the continuation of this current months-long bear market and would also indicate we may expect even lower prices and a prolonged period of depression before things turn green again. Let us start with discussing such bear scenario:
The Bearish Scenario - The Month to Year-long bear market
Taking out the $6400 Low would likely lead to more volume selling into the $6000 critical support which is quite close with just $400 in difference. At the point when $6400 breaks on volume panic might unfold in the market, sending prices way below $6000 which would indeed mark a prolonged bear market incoming. So what are potential levels to be retested before we turn green again?
As mentioned before, usually lower levels of support will be retested that sparked the previous rally. So in that regard, $5000, $3000 and $1300 are such levels, being previous Highs, now turned into support. Which level will eventually be tested is up to discussion and depends on the degree of panic resulting from the $6000 break among other factors.
It is also interesting that the measured move down from the top structure points towards $1500~ as a potential target, should this pattern unfold. As said on numerous occasions before, although unlikely from today’s perspective, a retest of the old 2013 ATH around the $1000 mark would make a lot of sense to me after taking out $6k, purely from a technical perspective, not taking into considerations fundamentals or personal feelings about it.
What makes the $1000 mark even more interesting is the fact it is also the next critical level of support when viewed in log chart:
Coming from the thought that the All Time High at $1090 back in 2013/2014 was such a significant point in the chart, a retest of that level under normal circumstances would be most logical. I say under “normal circumstances”, because this is crypto, and despite the apparent bear market possibility is real, I remain patiently bullish for numerous reasons.
The Bullish Scenario - Continuation of Major Uptrend &
Re-newed Global Fomo
Looking at the 3d chart, $BTC has finished a three legged correction down from the top, and built a double bottom formation around the $6000 Lows, indicating the demand at these levels became higher than the supply, thus turning around the price. Bears here failed to generate a new Low under $6k, thus bulls may attempt to take over the market, protecting the $6000 / $6400 Lows in order to drive up the price later. Of course, should the Double Bottom Low get triggered below however, those eager bulls will get stopped out, adding to the evolving panic in the markets. This is not of concern right now, as we have several bullish indications suggesting an uptrend continuation is more likely at this stage:
$BTC currently resides in buy zone between EMA 100 and 200 on 3d chart, which has already been tested two times prior ($6000, $6400). This may be the third and final test of this level before the trend resumes upwards.
We also have a clear structure building up in form of a triangle which might go either way, although generally being accepted as a continuation pattern. A break of the upper trendline in this context however would make a potential 10k attack more likely, while fooling as many traders as possible using the bearish symmetrical triangle as a guideline for their trading. The volume is steadily declining indicating that a spark is coming to the markets in the short-term, igniting the next major move.
On the Daily chart the current situation is more vivid, showing the triangle in more details. What is interesting is that both EMA 100 and 200 are in the same spot while EMA 20 is slightly sloping down. EMAs being bundled almost always indicates a strong move is in the making, more powerful the higher the timeframe. It should be also noted that the EMAs still indicate the uptrend is intact, but time is against the bulls now. They need to drive the price back up above those EMAs for the uptrend to resume. At the same time, Volume is generally descending which indicates that the current corrective move is about to lose steam and bulls might be taking over soon.
For a bullish move to be successful, all needed here is a strong volume push upwards in order to trigger new buyers into the market who want to position themselves very early for the next run, potentially before 10k gets attacked / broken. Remember, as soon as 10k psychological level is broken and retested, resistance will turn into major support and 10k will be protected by buyers from this point onwards. Thus what is attempted is to position as early as possible, with as less risk as possible, with the greatest distance to 10k as possible to be safe for holding in the future (as entry levels won’t get retested again).
An even closer look into 12h gives a good picture of what is to be expected. Prices have retested previous breakout support while generating a three touches + failed breakout pattern which often is the beginning of the next uptrend as sellers sold into the bottom at the downside break below trendline. We also have some rising volume as a result of this failed dip, indicating it might be bulls turn to control the market in the coming days and weeks.
For truly confirming a bullish view, what I would like to see is a strong trigger of the indicated green line with rising volume entering the market, then a break of the upper wedge trendline with both accelerated speed and volume. Reason why I consider this a realistic scenario is the fact that bears and shorts have been trapped in this last failed dip below the wedge trendline, and are forced to liquidate/close their positions on any move up, thus contributing to the upside motion generated by potential early buyers.
For the moment, bears remain in control of the short-term market, but at the same time indicate exhaustion may be near. Bulls are still sitting at the sidelines waiting for the right moment to make a move and will likely protect price levels below $7000 until $6400 which is the last major low. For a major uptrend continuation the $6400 low needs to hold, and bulls are very well aware of that, thus will likely do everything at their disposal to make prices stay above that level. Bears on the other hand need the $6400 break for the bear trend to continue, so a clear battle is emerging between both camps that will result in the sparking of a new trend in either direction.
Considering bears are still driving market’s direction for now, another dip down into the $7000 - $6900 area is a possibility, albeit unlikely given we had the three touches + failed breakout pattern which is usually very reliable. Should the local bottom at $7260 not hold, bulls will be under pressure and both reactions of market participants as well as volume should be closely observed.
In a Nutshell
Close above $7655 would trigger the failed breakout pattern, putting pressure on bears.
Break of $10k would confirm the Continuation of the Major Uptrend & would lead to new support formed at that level, protecting lower entries.
Any Close below $7260 might trigger a cascade of stop orders fueling the leg down, which would put pressure on bulls to defend $6400 Low which is a crucial key level to hold in order to avoid a prolonged bear market.
Right now I remain slightly bullish for the coming Days, albeit both bullish and bearish scenarios being realistic possiblities. Price action in those coming days will give further clues in which direction we are heading and should be closely observed. We must not forget that although we have been in depression in recent months that an uptrend continuation is not only a possibility but remains very likely. All we need here is a strong push upwards and new buying interest will emerge, quickly driving up the price back towards ATH. Whether or not we may take out 20k in one move or not can be better assessed at a later stage with more significant price action at our disposal.
If I had to bet on one scenario playing out, it would be the a bullish break of the developing triangle in 3d chart, then a Cup & Handle formation leading up to a 20k ATH break, renewed global media attention and journey towards $50k+, roughly indicated below.
The Battle of $6000 will likely decide BTC’s fate for the rest of the year, so close observation is advised for the coming days.
May the Charts Be With You,