BTC 24 Jan - a change of direction

As I promised in my post of 22 Jan "Once I have better information I will publish an update in this regard (if necessary). "

I have better information. You're reading that update.

You can see my previous BTC post here: BTC 22 Jan – Medium-term update

In it I proposed two possible scenarios: A drop to lower price levels or a modification to the tapering triangle we were in, resulting in a later price breakout.

In that post the price had just dropped through the bottom of the previous triangle, but not definitively so. For further details on those scenarios, see my 22 Jan BTC post.

From BTC 22 Jan – Medium-term update

Analysis of what happened next

BTC did break through to a new 2019 low in accordance with my first scenario (to which I had allocated a 55% probability of occurring).

It reached a low of $3400 on BitMex (home of the highest volume BTC/USD trading pair), which is a little higher than the $3300-3200 range I was expecting.

Analysis of future events

Initially I thought that a hybrid of my two scenarios may have occurred: a new 2019 low and an update to my tapering triangle (as shown below). The updated triangle would account for the new low and serve to help predict the next breakout.

I now no longer consider this to be the case. The breakout happened, small though it may have been, and continually modifying that converging triangle is beginning to look an increasingly suspect TA strategy. Hence I am discarding the triangle and looking ahead without it.

What I do clearly see is a new short to medium-term trendline originating in mid-December (as shown below).

After BTC reached the new low, I soon realised that this was more than just a trendline: I now interpret BTC price movement as being in a channel.

This is good news because the previous price movement was strongly positive and this channel is a consolidation period.

In other words this channel is a bull flag.

A bull flag is a continuation pattern; specifically: it is a positive pattern.

I therefore expect a price climb after the flag has been created.

It is very difficult to say where and when the breakout from the flag will occur. Volatility has been high enough that medium-term fib levels are poorly defined; quite honestly I'm struggling to find enough of them to make a decent prediction - so I won't.

What I can tell you is that you should be on the lookout for BTC breaking through the top of the bull flag rectangle. When that happens I would consider taking long positions in BTC as it should then rise much further. I would consider a rise to previous major levels such as $5500 or even $6200 quite possible.

Realise that BTC may fall further within this flag before breaking upwards. That is fine as long as it doesn't break through the bottom of this flag, in which case this scenario is incorrect and there is no bull flag.

Bit Brain's: probability of this scenario being correct: 70%.

Probability is particularly high because there are also long-term patterns coming into play here (which I have not discussed in this post - perhaps I'll do another long-term post soon).

All charts made by Bit Brain with TradingView

Yours in bull-flagged crypto

Bit Brain

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