Bitcoin at important inflection point
There have been some big gains in Bitcoin and the broader crypto market over the weekend, but now it looks like we’ve seen some profit taking. But that profit taking is near a zone that is understandable to see bulls want to leave – and one that bears want to enter.
Bitcoin and the broader cryptocurrency market experience a significant drive higher on Sunday. While the news sounds bullish and indicative of some return to a bullish buying spree by retail traders/investors, we might be a little discouraged. The majority of the move happened during a 5-minute period with 1,458k Bitcoin traded, moving Bitcoin from 3848.49 to 4041.00. Before that trade and after that trade prices remained in a tight and flat trading range, indicating that the move up was one individual/group. But prices have maintained their current value around the 4000-value area and traders have apparently decided to keep the 4000-value zone as support.
Technically, the move up on Sunday broke above a key triangle that had been forming since December 28th, 2018. The type of triangle is a symmetrical triangle. In technical analysis, certain triangles have certain common behaviors associated with their type. In the case of a symmetrical triangle, they are a mostly neutral triangle – but when they form soon after a prior up or downtrend, they can turn into powerful continuation patterns. In the case of Bitcoin, price began to consolidate after a large move up and then that consolidative price action turned into the symmetrical triangle we see on the chart. One thing that is common in all triangles is that we often see the breakouts happen during the final 1/3rd of the triangle, with volume falling prior to a breakout. There is another triangle that has formed off of the Sunday spike, with the apex of that triangle appearing on January 8th at 0400.
Daily Ichimoku resistance
One of the most important zones that traders are looking at is the current daily candlestick and its proximity to the bottom of the Cloud. The last time Bitcoin intercepted the bottom of the daily Ichimoku Cloud, it traded in some choppy price action that existed from July 16th, 2018 all the way to September 7th, 2018. From September 7th, 2018, Bitcoin traded constantly and consistently just below the Cloud until November 13th, 2018, just before the most recent slaughter and selloff of 2018. But this is also a fairly fast time period for Bitcoin to test the bottom of the Ichimoku Cloud so close to after the most recent drive lower. Bitcoin is fast approaching another price action catalyst at this present level. We could just one more of many bull traps before another prompt and violent selloff occurs. Then again, this could be a setup for a major bear trap where shorts attempt to keep the status quo moving – but instead will fuel a rally that will put Bitcoin into the first bullish Ichimoku breakout setup that it has had since mid-2017.