A powerful time cycle in the work of WD Gann could suggest a very rapid pullback.


The Death Zone

WD Gann is one of the most important, mysterious and influential technical analyst and trader of all-time. He is one of the Fathers of Technical Analysis and trading. What separated Gann from his contemporaries was his use of time as the primary tool for determining his trades. He measured time and his cycle in various ways. Some of his sequences are long and exist for 90-years. Others are much shorter and last only three or seven days. Some of the most potent cycles that Gann ever wrote about were in veiled language and based on astronomic cycles (the science of astronomy). But there is one cycle that Gann wrote about that seemed to be given some special attention: the 49-day cycle.

Bitcoin (BTC)

Bitcoin (BTC)

The 49-day cycle (the Death Zone) has a shocking number of occurrences on Bitcoin’s chart. The blue highlighted boxes show the 49-52 day moves of the death zone. The importance of this cycle is related to the number seven. In Gann’s work, the number seven is one of the most important numbers you will use, as well as multiples and divisions of seven. The 49-day cycle is a seven-week cycle.  Seven trading days are in a week. Seven multiplied by seven gives you 49 – and for whatever reason, if something is moving on one direction for 49 days, your prices will often find a reversal. You will find this kind of behavior present in any market. So what does the death zone mean? Gann said that this cycle is often part of a ‘blow-off’ move – a fast and powerful directional move. If you notice Bitcoin or any other cryptocurrency moving in one direction with a very steep slope, odds are you will find some resistance between the 49 to 52-day trading range. But does this mean that reversals always occur? No.

If you observe any of the many 49-52 day cycles on the chart above, you’ll find that pullbacks are often swift and last only a short while before the trend continues in the direction of the prior 49-day move. One of the most important things we want to look out for regarding the 49-day cycle is where does it show up in relation to previous price action? If we were to observe two consecutive 49-day cycles moving in the same direction and relatively near one another, then we should anticipate an extremely high probability of a reversal. Why? Because two 49-day cycles bring price to a 90-day cycle – a cycle which causes massive reversals with a crazy high-frequency rate. What happens if we spot a 49-day cycle at the beginning of a new trend or corrective move? It means that we could see price continue to trade higher after a period of culmination and range trading. The current 49-day cycle comes off of the six-month-long corrective move Bitcoin experienced from June 2019 through January 2020. Because this is the first significant bullish move from that long term corrective move, we should anticipate Bitcoin breaking out higher.

But I am very wary about any continuation move higher. I’ve taken profit on around 33% of all my cryptocurrency positions. I have buy stops ready to trigger on any confirmed move above the $10,000 value area.