Wyckoff Distribution Pattern: Bitcoin

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Looking at Schematic 2 of the Wyckoff Distribution Pattern as it relates to the price action of Bitcoin. I would prefer to see an uptrend preceding the distribution, but other than that it all lines up rather nicely. Point #9 created a lower high and then returned to the ice line. This gave us the signal of weakness which generally precedes the best opportunity to take a position.

"Point 11 gives us our last opportunity to cover any remaining longs and our first inviting opportunity to take a short position."

We are quickly approaching the best time to build short positions and/or cover longs. There is strong resistance from $7,000 - $7,500 and I expect the price to reverse somewhere in the range. I am holding off on opening a short at this time due to the Green 6 on the TD Sequential which indicates 3 days left to the upside. If we get a daily shooting star or hanging man then I will likely position myself before then.

Schematic 3

Keep in mind there could be a shakeout before the breakdown, or as Wyckoff put it:

"Upthrust after distribution (UTAD)" which often results in "weak holders of short positions giving them up to more dominant interests before decline ensues."

How can you tell if it is a fake out or if it is a real breakout?

"If this breakout occurs on light volume with no follow through or on heavy volume with a breakdown back into the center of the trading range (TR) then this is more evidence that the TR was distribution and not accumulation."

For more in depth analysis please refer to Bitcoin Daily Update (day 182)

Source

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