Hello fellow crypto enthusiasts! I hope you are all having a great weekend. So, the Bitcoin (and cryptos as a whole) saga continues!
I wish my analysis and my outlook in the short to medium term was not so negative but I’m afraid that it is. What I am seeing when I look at Bitcoins price action is steadily growing pressure. I believe the pressure is growing just like a spring that is being compressed. I am seeing this in a couple of ways, the first is what I see as the price forming smaller and smaller descending triangles and secondly, I am seeing a compression or increased frequency of the price waves. At some point I believe it is going to explode in one direction or the other. Unfortunately, I feel the odds are that it will be to the down side.
If this does happen I feel that we will see a quick and substantial drop, I would say that most likely to the $5000 level or possibly even lower. To try and determine the ultimate downside target we can measure the widest part of the red descending triangle which measures about $2700 so I would estimate the downside target to be around $3000. I don’t believe we will see an immediate drop to this level it most likely will take several weeks or even months to get there.
Like I said I wish I had a more positive outlook but at this time I don’t, I would have to see a big change in the price action and much more bullish momentum before I could change my opinion. I published a chart back in July where I listed important milestones that I want to see before I will believe we have entered into a new bull market (Link below).
I am also not trying to say that this bearish outlook is a sure thing, I could very well be wrong, and the major support level Bitcoin has been bouncing off will continue to hold. There is a possibility that Bitcoin has bottomed, and we are now in a consolidation phase, but I will have to see support continue to hold and the pattern change from descending triangles to a channel before I will believe it.
For those not familiar with descending triangles here is a brief overview from StockCharts.com.
1) The descending triangle is a bearish formation that usually forms during a downtrend as a continuation pattern.
2) Trend: To qualify as a continuation pattern, an established trend should exist. However, because the descending triangle is definitely a bearish pattern, the length and duration of the current trend is not as important. The robustness of the formation is paramount.
3) Lower Horizontal Line: At least 2 reaction lows are required to form the lower horizontal line. The lows do not have to be exact but should be within reasonable proximity of each other. There should be some distance separating the lows and a reaction high between them.
4) Upper Descending Trend Line: At least two reaction highs are required to form the upper descending trend line. These reaction highs should be successively lower and there should be some distance between the highs. If a more recent reaction high is equal to or greater than the previous reaction high, then the descending triangle is not valid.
5) Duration: The length of the pattern can range from a few weeks to many months, with the average pattern lasting from 1-3 months.
6) Target: Once the breakout has occurred, the price projection is found by measuring the widest distance of the pattern and subtracting it from the resistance breakout.
Thank you for taking the time to check out my analysis and I would appreciate your feedback, if you think I am crazy let me know!
I also published this analysis on TradingView so for anyone who wants to get a better look at the charts here is the link.
Until the next blog post, Take care!
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