Bitcoin: How to predict and forecast price
The analysis in this article uses a chart style known as Point & Figure. With this chart style, we can objectively and easily identify what Bitcoin’s initial profit target could be post-breakout.
Bitcoin’s Point and Figure Chart
If you want to read the best book on Point & Figure Charting (and one of the best technical analysis books out there), check out The Definitive Guide to Point and Figure Charting by Jeremy Du Plessis. It is from his book that the following calculations for future profit targets come from.
When we look at a Point & Figure chart, we see a style of charting that is very peculiar compared to the defacto style of Japanese candlesticks. In a nutshell, Point & Figure charts are a price action traders purist form of charting. There is no time factor involved or volume recorded – just price. And while it looks like some type of time factor is involved, it’s not. The only thing that is recorded, horizontally, is reversals. And that brings us to the structure of a Point & Figure chart. Boxes (Xs and Os) represent an amount of movement: ticks, points, pips, satoshis, dollars, etc. Xs represent upward movement and Os represent downward movement. The reversal amount is the number of boxes that price must move before an opposite column is printed on the chart. That exact structure is what we will use to identify future profit targets.
Vertical Price Targets
To identify a profit target in the future from the current column of Xs, then we need to follow some simple steps.
- First, count the number of X’s in the prior column of Xs. In this case, there are 13. We then take 13 * the box size (which is 100). 13 * 100 = 1300.
- Next, we multiply 1300 by the reversal amount, which is 3. 1300 * 3 = 3900.
- We then look at the column of Os right next to our current column of Xs. We find the low of that O column and then add 3900 to that value. The low of that O column is 10000. 10000 + 3900 = 13900.
To get a full idea of the potential profit, we need to identify where the entry would be. According to the entry rules on a 3-box reversal Point & Figure chart, we must wait for price to break a multiple top. The next multiple top occurs when price returns to 10800 – where it will create a double top. The entry would be one box above that: 10900. If our profit target is at 13900, then we can see a potential profit of $3000 – a +27.52% gain from an entry at 10900. Of course, it is entirely possible that if Bitcoin does drive up to that level it will continue higher. The move that occurs here on this chart would be the same breakout condition from the bullish pennant that exists on Bitcoin’s candlestick chart. We should certainly look for the 2019 high to be broken in the event of a move above 10800.