Bitcoin (BTC) Continues to Consolidate
Bitcoin continues to range and constrict inside key Gann geometry. Bitcoin’s bullish pennant formation remains strong.
Bitcoin’s Bullish Pennant
The triangle pattern on the chart above represents the bullish pennant formation that continues to contain the current price range for Bitcoin. The four points used to identify the triangle are from the June 26th, 2019 high of 13,868.44, the swing low of 9,071 on July 17th, 2019, the next lower swing high of 12,320 on August 6th, 2019 and finally, the last higher low of 9,470 on August 14th, 2019. The apex of this bullish pennant ends on October 2nd, 2019 at 1900 EST. What I find very interesting about this pattern is the specific time that the apex of the bullish pennant occurs. It occurs exactly on the date where the outer most Gann arcs converge on the 4/8th Major Harmonic at 10,882.50. I do no believe this is a coincidence but is more of a complementary form of analysis to my Gann analysis.
I previously wrote about the expected behavior of Bitcoin’s price action given the presence of an every constricting price range between the two outermost Gann arcs (blue arcs above and below price). Ever since price fell through the upper arc on August 13th, 2019 price has been bound between those two arcs. Price has also been testing the 4/8th major harmonic as a support zone. Because a bullish pennant is just another name for a triangle, there are specific behaviors that we should expect price to display prior to any major breakout of this pattern. First, the volume should decrease the closer we get to the apex and we should see prices consolidate. Second, breakouts of a triangle often occur in the final third of a triangle. If we were to separate this current pennant into thirds, then the final third of this triangle would start on August 30th, 2019. I also find that interesting because that is very, very close to the 2/8th harmonic pivot on September 1st, 2019.
While prices do display some common behaviors inside patterns, that does not mean price will always show that behavior. Anyone who has traded any instrument on a faster time frame knows that the trendlines in triangles are often breached or ignored – which is very common. Also, we know that prices can breakout before the final third of a triangle. Price can also travel all the way to the apex and even trade beyond it in a continued consolidation zone. And while range trades inside any geometry are ‘boring’, it is important to know that this kind of behavior is normal and desired. We have spent almost two months watching Bitcoin consolidate after 5-month of consecutive strong growth. If we want to see higher prices and if we want those higher prices to remain high, then congestion zones like this create the proper supportive structure for future higher prices. Additionally, the longer the period of consolidation that an instrument trades in is usually reflected in the strength of the breakout move from the consolidation. In other words: the longer a consolidation period, the higher prices will move over a longer period of time.