BTC Market Watch 6-18-18

Yesterday I wrote about a slightly bearish inside bar, and we can see how that has played out now.

Here was the daily chart set up:

As we can see now, we indeed got our bear break on the double coiling inside bar.

Now that we have gotten our breakdown, we need to take a new look at what the game plan from here should be.

We are currently holding our support at 6427 fairly well. As the volatility continues to decrease on the daily chart, a breakout, or breakdown will need to occur sometime in the near future.

One of the most important things I am closely watching is a cloud cross approaching as a lagging indicator in the near future.

Unfortunately, lagging indicators won't help much with making a trade, except that we can expect some sort of bullish rally is coming to BTC at some point in the near future. As far as the daily chart goes though, this is about it for clues, so if you traded the bear break, great, if not, there is not enough information here to enter a new trade based on the daily chart. To describe how bearish this chart really is right now, the price is currently at 6438, with a lower low, lower high pattern. In order to break this structure, a bullish move all the way up to 7794 would be needed in order to argue a trend reversal.

When you look at that, its pretty easy to see that a rally of that magnitude is realistically unlikely. So if you were to trade based only on the daily chart, I would be in a short position, or shorting the lower high. With that in mind, lets dive into the smaller time frames.

Here is the 4 hour chart:

A very different picture here, with lower high's, and higher lows, the 4 hour chart is suggesting volatility in either direction is approaching. Now to bring in the big guns.

This paints a very clear picture to me. Here we have extremely tight 4 hour bands, a larger move is coming. Should that direction be up, the upper band and the cloud are likely to provide extremely strong resistance. Couple that with the daily chart bearish pattern, and these bands are likely to expand with the price moving in the downward direction. Right now what I see when I read this particular chart is that the support level of 6427 is attempting to hold, but as the volatility decreases, we are eventually looking to breakdown to the next support level at 6-6.1k. Here is how I currently see this chart playing out.

For me, the bullish move is negligible compared to the possible bearish move forming. This is a trade setup I am indeed interested in watching closely for clues to exactly when this breakdown will occur. To add more evidence to this possible trade opportunity, I would go back to the daily chart inside bar, and the current structure of the daily chart. With the larger trend on my side, clear evidence of strong resistance only $100 dollars above the current price, and at least a few hundred before the next support level, this is a risk/reward opportunity I am interested in.

Finally, to take a look at the hourly chart. Right off the bat, this pattern jumps out at me.

I won't go into too much detail about it, except that breaking that neck line could easily provide the momentum that I see coming in the 4 hour chart.

A very clear trend line can also be seen on the hourly chart you could use to your advantage. Just look at how well established this trend line has become.

Generally, when I see something like this, I would look for a descending wedge pattern. But I see no such pattern. The 6427 support has not held true enough to be used as the bottom support for a wedge pattern. You could certainly argue a wedge pattern like this:

With a wedge like that, it is only telling you a breakout, or breakdown is setting up. Considering the trend, and the trend line in this wedge, the resistance has proven much more exact. Say we even do breakout to the upside from that wedge, I think it's likely to be a head fake. Why? Well, no sooner do you pop out of the wedge that you run right into the 50 EMA on the 4 hour chart that has conveniently shown up right as the wedge comes to a close.

Say we dump all the way to 6k, would we actually find support there? I think so. Take a look at this possible bullish butterfly that would verify the D point starting at 5947.

This says to me, that if indeed a dump is setting up to occur, a SMALL bullish position could be started around 6k, and slowly scaling in as we dump deeper into the upper 5k's. This could be an easy trade to catch a bounce to 6100 again. This is of course only IF this pattern comes to develop over the next day or two. We will have to keep our eyes peeled for it.

Thanks for reading,

-Icee-

Please leave me an upvote, and remember this is not trading advice.