Point and Figure analysis provide clear analysis. Price action only – no volume included.

Major trendline tested

It’s very easy to get caught up in the minutia of price action, especially if you look at this market day in and day out. Sometimes it is easy to forget the bigger picture and some of the major zones that will require testing before Bitcoin can break higher. This pullback that Bitcoin experienced over the week was not unexpected (I wrote about it just last week on June 26th, 2019). In the analysis I provided last week, I indicated a series of astronomical time cycles that coincided with Gann’s 180-day cycle of the inner year would generate a probable market swing high – and so far that has played out. But there is one other piece of analysis that would have indicated a swing high would be encountered, and that can be seen on the image below.

 

 

The chart above is a Point and Figure chart – a price action traders purist form of charting. On this style of chart, just price is considered, there is no time or volume. This particular chart is a 200×2 Point and Figure chart – which means that each ‘box’ (X or O) represents $200. The 2 represents the reversal amount – this is the number of boxes that price must move in order to generate a new X or O column. The green arrow is pointing towards the higher downtrend line that Bitcoin has, and it is built off of the all-time high. More importantly, it is a 45-degree angle. We can observe that no less than four columns of X’s and O’s have been testing this downtrend line, with most recent test resulting in a massive drive lower towards the psychological level of $10,000. But if I wasn’t long on Bitcoin already, where would my re-entry be? Where would I feel comfortable entering where I knew it wasn’t too early but it also wasn’t too late? Point and Figure charts tell us that as well.

The most recent column of X’s ranges from the swing high of $12,000 to a low of $10,200. What matters most on this chart is there the most recent columns of X’s topped out at – and that is right on $12,200. This is an important level for two reasons. First, if and when a new column of X’s forms and it returns back to $12,200, we will have formed a double top. Double-tops are a common and key component for any bullish entry on a Point and Figure chart. Second, a return to $12,200 would mean price has broken above the downtrend line. While a break of the trendline sounds like a good opportunity to enter a trade, it is, in fact, not enough. We do need to see price break above this current downtrend line, but more importantly, we want to see price break above the double-top that would format $12,000. From there, we can determine an entry. And that entry would be one box above $12,200 at $12,400.