Key resistance levels continue to be tested. Fake-outs higher and lower have occurred.

Bitcoin teasing with a breakout or breakdown

               On the chart above, there are two sets of downtrend lines. The red downtrend lines are drawn from two specific dates but from two different levels. The highest red downtrend line is a trend line drawn from the wicks made on June 26th, 2019 at 12927.44 to July 10th, 2019 at 13292.63. The lower red downtrend line is drawn from the open of the June 26th, 2019 open at 12572.12 to the open of July 10th, 2019 at 12572.12. Both of these trend lines have been respected by price as a source of resistance. The black downtrend lines are drawn with the same style: wick to wick for one set and body to body for the second. What I find really interesting about black downtrend lines is their near parallel nature. But Bitcoin has failed to move above these zones and has continue to trick bulls and bears alike, but change appears to be coming very soon.

               Depending on how you would measure the time of this resistance zone being traded, one could argue this zone has existed since the very beginning of August or to just the last couple trading days. The time period I am focusing on and watching is the most recent price action where the beginning of the black trend lines begin, August 6th, 2019. For the past two trading days, there has been a very large battle brewing between bulls and bears. If we were to look at a zoomed out chart on the 4-hour or daily chart, we would see that there is a strong bullish continuation pattern that is/has formed on the chart. Arguments could made either way for the existence of a bull flag or a bullish pennant. If the pattern is a true bull flag, then this move could extend long and we could see lower prices. If this pattern is a true pennant, then price is getting very close to the apex of that pennant.

               There was a bear trap initiated near the New York equity market close at 1600 CST where bears were able to push prices down nearly -$300, but this was immediately bought up and creating a probable bear trap. Price found strong support against the bottom of the Ichimoku Kumo and then rallied to create the second lower high before finding resistance above the Ichimoku Kumo, creating a sort of bull trap. From that point on, we have seen prices oscillate and ping-pong between the red downtrend lines and the black downtrend lines. The most recent threat to a probable break lower was during today’s (August 8th, 2019) NY afternoon trading when price fell through the bottom of the Ichimoku Kumo and it looked as if the Chikou Span was also going to drop – a clear short signal.

               While prices continue to congest against a series of trend lines and patterns, the question is always: which direction will price go? If the old saying, ‘the trend is your friend’, is true, then most definitely the most highly probable direction is higher. If we include the existence of a bull flag and/or a bullish pennant – both strong continuation patterns – then the direction is very heavily weighted to the bull side of the market.