BTC - Rejected at Resistance

Bears positioning for downtrend continuation?

Just a quick update this time.

It seems BTC got rejected in local resistance after an attempted breakout above the $7,000 level / invalidation point (as outlined in last post).

XBTUSD - Daily Chart

Prices did trigger but could not sustain this altitude. Any weakness in this zone is to be seen as an indication that the trend is still down, while this move up is just a temporary pullback. Bears will use such weakness to sell further positions short in expectancy of trend continuation. The zone of rejection also coincides with EMA 20 on Daily which continues to act as resistance as long as not confidently taken out. It is however to be noted that the Daily bar has some hours left before being closed.

XBTUSD - H4 Chart

With a second failed attempt to break out to the upside, while still trading in local resistance, BTC now faces another impulsion down. It is to be noted that it is also the second time that price dips below trendline, which further indicates weakness to sustain the current upside momentum. What might be forming is a potential Double Top after retesting the zone between EMA 100 and 200, which in a downtrend acts as a sell signal.

Whats Next?

Given that BTC is trading in resistance and got rejected twice, Bears will attempt to position themselves expecting a leg down soon. However it is likely that they want to see more evidence of the temporary uptrend crumbling before taking or adding to positions. Once positions entered, their stops will mainly be above the outlined Double Top. Early birds will try and take the sell signal of the bear reversal at trigger $6,454. The bearish setup would be invalidated with a break above recent High at $6,984.

On the other hand, if enough Bears are trapped and the Double Top does NOT play out, this might be sufficient fuel for a strong leg up, stopping out all Bears who then need to buy back their shorts, further driving the price up.

In a Nutshell

Current uptrend shows weakness, which will be capitalized by Bears, if Bulls fail to drive up the price above $7,000. Any further breakout to the downside will be used by Bears to enter or increase positions expecting another leg down. If this ends up being a trap and BTC moves higher instead, Bears will be forced out of their positions, potentially fueling a rapid price increase.

Update from Last Letter - Silver

On a quick notice: After triggering the clean Cup & Handle in H4, Silver raged upwards, being up around 11% at time of publication, and reached first target at double the height of the Cup. Second target would be around previous Lows at $16.30~ if it gets that high.

That much for now, hope you found the information helpful. Read you next time!

May the Source be with you,

CY

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