In a slow and steady fashion Bitcoin spent almost two months in consolidation range. Naturally, the question needs to arise whether we are in denial phase before the next bull run, or whether price is topping out before breaking down for more retesting.
The Attempted Break of $10,500
For numerous reasons $10,500 remains a key level in all higher timeframe charts.
The Weekly clearly shows three consecutive Highs around this mark. The recent attempt to break above this key level clearly failed, resulting in a week-long consolidation period between $10,400 and $9000-ish.
Some would find reasons why this might not be a Triple Top, but as long as there are three consecutive Highs not being able to break the previous ones, healthy caution is advised. It has not only bearish indications however. A break above the Triple Top Highs would be an excellent entry long due to the massive amounts of stops being placed above. However, as long as price is trading below $10,500 the implications for the time being would be bearish. It needs to be noted that this is solely a snapshot of this moment at this time. Within the structure BTC is currently trading in and given the relatively high altitude things can potentially change rather quickly.
Trend-wise it is obvious that the EMAs are all crossed upwards, confirming the Weekly trend is indeed up. Hence, most attempts to reverse this trend down should be expected to fail. It is not unlikely that in the case of breaking down, lower EMAs such as EMA 20, 100 and 200 are excellent temporary targets and points of high interest.
Failure in breaking and holding above $10,000 has been a warning sign. Seeing 10k as a critical mark, price needs to break above decisively and successfully retest this level afterwards to confirm that the resistance has changed to support, a point from which the new run might emerge. This has not happened for the time being.
Looking at the 3d chart we do see a similiar picture. All EMAs are crossed upwards, while EMA 20 acted as a valid key support during the previous weeks, pushing up the price whenever this level got tested. As long as the EMA 20 remains supportive and pushes up price higher, this might turn out to be consolidation before running higher afterwards. Losing the EMA 20 support (currently $9090~) would potentially increase selling pressure for the coming weeks if not immediately retaken. If the 3d EMA 20 loses its grip on price, next support would be EMA 20 on Weekly, currently placed at around $8600.
In this slightly more detailed view it becomes clear that the price action we have seen in the past months might be in the process of turning into a V-shape reversal. For a proper V-shape reversal I would expect to see another three wave consolidation to make this a proper and valid pattern. This would be in coincidence with a potential inversed Head & Shoulders pattern emerging, while the right shoulder still needs to be developed. A proper depth for such right shoulder should be around the same mark as the left shoulder, i.e. around $6500 and $7500-ish. However more important than reaching this area is that we see clearly defined three legs of consolidation and bullish strength at the end of it to become a valid early entry long in accordance with the pattern.
The Daily shows the impressive recovery since the violent breakdown to $4000. Almost a full retrace, but also clear struggle in maintaining price in the area around and above $10,000. EMAs are crossed, but yet only for a relatively short period of time, making them somewhat unstable. EMA 20 had great difficulties in pushing up the price, now beginning to face down once more. While EMA 100 and 200 ($8830 and $8550 respectively) should offer support, there is no guarantee that price would stop there if another violent breakdown on volume would occur from here.
One could argue that within this rather messy consolidation a nested bearish Head & Shoulder is forming, indicating the local top was around $10,400. Breaking through the neckline would invite shorts into the market, which could be a dangerous game to play as the EMAs are just below the neckline.
In this scenario I see three ways of moving forward (see picture above for reference):
The neckline gets triggered, shorts enter the market, but the EMAs below remain supportive. In this case this would be classic bear trap. Price would find support at the EMAs and quickly turn up again, shooting out on the other side of the range, forcing all bears out of their positions.
The neckline gets triggered, massive shorts enter the market on significant volume and we just glide through the EMAs, which then lose their supportive function. In this case panic could unfold, leading to irrational behavior of market participants. Volatility and turbulence needs to be expected in this case.
The neckline does not get triggered but remains supportive. With a failed attempt of breaking the neckline, the Head & Shoulder pattern would quickly be assessed as being a failure, leading to a potential buying spree.
After having failed to break and remain above critical mark $10,500 Bitcoin remains in consolidation in uncertain territory. For the sake of bullish pattern completion another correction to below $8000 would be healthy for the market structure, but is not necessary. Any break above $10,500 would be enough to kick off a larger bull run.
In A Nutshell
Currently trading at $9250. Neutral to Bearish as long as below $10,500, expecting more consolidation. Bullish above $10,500.
May the Source be with you,