Bitcoin Pushing to Break Wedge, Gathering Momentum After Consolidation

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ecodebase2021/07/24 20:49
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Bitcoin is trading higher for the fourth consecutive day, it's longest winning streak since April of this Year. Price continues to hold inside the wedge and within the more general arc we've previously described in these pages. We expect a major move out of the arc, considering timing and the slight upturn on the MACD, the current momentum favors the bulls coming out of the arc on a bullish break out of the wedge. Bears can point to flat and declining volume trends to support a break below $28,800.

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Bitcoin Pushing to Break Wedge, Gathering Momentum After Consolidation

Bitcoin is trading higher for the fourth consecutive day, it's longest winning streak since April. 

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Price continues to hold inside the wedge and within the more general arc we've previously described in these pages. We expect a major move out of the arc, considering timing and the slight upturn on the MACD, the current momentum favors the bulls coming out of the arc on a bullish break out of the wedge. Bears can point to flat and declining volume trends to support a break below $28,800.

Bulls are looking for sustained run to test the 200 EMA around $38,500, first requiring a bullish cross of the 50 day EMA around $35,125. Failure to sustain momentum pushes Bitcoin back into the confines of its declining wedge with strong support showing up between $29,500 and $30,000. Bitcoin has pinned the $30k price line a handful of times since mid-May but not been able to sustain downwards movement, promptly rising back to around $32k each time. 

When stocks are under consolidation, we expect to see thing properties occur simultaneously on a price chart:

First, there will be definable and steady support and resistance levels, like a flag continuation pattern. These patterns tend to occur after strong price movements, forming narrow trading ranges. Pennants take triangular shapes while flags tend to be parallel. Pennants tend to get smaller over time. These patterns form when the market takes a breather. 

Second, we expect a narrow trading range. However, trading ranges are relative and Bitcoin is historically volatile. What do we see when we look at a longer term chart? 

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We can see on the Weekly that the range is narrow relative to the rest of 2021, but overall, narrow is going to be subjective at best here. 

Third, we need to see a relatively low level of trading volume that doesn't exhibit major spikes. Again, the image above also describes volume. The ranges are narrower if we use the 1D that if we use the 1W. 

When we identify that the stock or asset is in consolidation, we look for breakouts. The common trading strategy when trading on a breakout is to buy long and cover short as prices break through resistance, or conversely, buying short and covering long. Conservative traders look for confirmation before entry. It is common for old resistance levels to form the new support levels on a breakout and vice versa on a breakdown. This isn't financial advice, it's just how consolidation patterns tend to be traded. If it were financial advice I'd name an entry point and then I'd be pretending to be something I'm not. There's your disclaimer, folks!

Now, let's drill down to the hourly chart. 

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We can see two discernable pushes up and, potentially, the beginning of a third leg up. These pushes tend to come in threes and fives. Let's look again with the EMAs built in:

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As we would expect, we can observe that the pushes are littered with vector candles - increasing volume. 

There are a lot of signs here to encourage the bulls further, however with our recent sideways trading, plenty to excite the bears as well. 

In the immediate term, we'll look for a third push in price to send us to test the 50 day EMA. However, on the hourly we can be encouraged by bullish movements at the 50 EMA, 200 EMA, and the 800 EMA (where it paused overnight, if you're in New York) on the 1H. All three levels are now successfully broken, so should BTC fail at the 50-day EMA, we will immediately look for support at the 800 EMA above. 

Happy trading!


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