What price action tells us about Bitcoin – The Dynamic Trader
Bitcoin has been on a tear lately and some are piling on while others are bailing. What to do with Bitcoin is all a matter of its price and your time horizon.
I prefer to use charts rather than hysteria to guide my decisions…
In this chart you can see Bitcoin in its two big run ups since 2011. In both cases there is a parabolic rise, the previous one followed a by year long decline in 2017.
WD Gann taught that a sustainable trend has an angle between 30 and 60 degrees, preferably around 45 degrees. I have drawn two lines at 45 degrees from the beginning of both run ups to see how price is compared to the angle. You can see the last run up was almost vertical, while the most recent one is less steep. Still a bit above the line, but not as bad.
Lets dive into the most recent run up and see if Price Action can tell us if it is sustainable. Another concept is called a Double Top, which is a reversal pattern. It looks like an M when complete and you can see one starting to form on the daily chart. So Price Action is telling us that Bitcoin has a high probability of reversing direction to the downside if the M completes.
Another favorite of the Price Action crowd is the Fibonacci retracement tool. This helps us figure out where the market is most likely to land. The strongest level is between the 50% and the 61.8% area, which is highlighted in yellow.
So, what do you do? Again it all depends on your time horizon. Price action is telling us that Bitcoin is most likely going reverse and find support around the $8,000 area. If you are in it for the long run, then be ready to sustain some losses. If not, then I would be on the sidelines for now.
Randy Balcom- Price Hacker
Published at Thu, 04 Jul 2019 17:27:15 +0000
