Daily Report – Bitcoin and Market Update (January 18 2021)
Weekly chart has shown first lower high inside week candle for the first time since the entire rally started to accelerate around 20k. Local sign of weakness is out of question here. Overall, it confirms so far my thesis of January-February being usually surrounded by retracements on the market. The most concerning aspect of the entire upside rally is undoubtedly the lack of volume on the way up. VWAP level to support BTCUSD in case of any major unexpected crash is set at 17k, which is 53% below current market value. Volume hence is not confirming the price action development which for classical market technicians would be a big sign of impending weakness and potential “crashability”. While this ofc is a far extreme scenario (which you should never undermine thought), it is clear BTCUSD has been in a very sharp uptrend going vertical. Latest week’s close may suggest we may be looking at another week of consolidation within the prior week’s high and low. In case of closing this week in the prior supply zone 38.6-42k where it showed weakness before, the new upside levels are unlocked at the levels given in my Saturday’s market report: 44k, 50-53.2k, 60k, 65k, 67.5k. Until that happens, intraweek price action and charts are the answer.
Daily price action reveals clean consolidation pattern in form of the symmetrical triangle. Per the pattern’s nature, it is the most neutral of all the patterns and purely depends on the breakout direction. We’re not locally in uptrend, but in a contracting/coiling sideways which has equal chances of breaking up and down. It is really in the pickle here, which means neither of directions should be assumed until BTCUSD sees an actual breakout. Upside breakout of the consolidation would suggest upside continuation to 44k and beyond (unless intraday fakeout) and downside breakout would be of downside continuation towards 26-28k area. MTF traders should not make any premature decisions based of such neutrality and should wait instead for the pattern to solve. Intraday traders are also very limited to the strongly narrowing range. In other words, BTCUSD is about to explode one way or the other with another 5-10k candle anytime soon. Betting the direction here (while weekly momentum is heavily overbought) is nothing else but a gamble with low chance of winning.
Technically speaking, continuation after strong rallies up leads to continuation, but we need to account vertical rally for 140%+ in matter of past 30 days with no correction while January-February are usually corrective. It’s truly a mystery which only whales can solve.
Middaily is showing the beauty of textbook symmetrical triangle with two most likely technical scenarios. 33.3k is the level which, in case of a breakdown can provide support from SMA50, can fake out the breakdown. It’s the level on which we could anticipate potential fakeout to happen. In case it’s reclaimed on the bearish side, the black curve scenario is probably to follow. Currently BTCUSD is clearly struggling inside the symmetry zone of the triangle confirmed by VWAP averages anchored on the triangle swing points. The zone is 35.5-36.8k and as mentioned yesterday on #nest-club channel, this is a no-trade neutral zone and breakout in either direction on the intraday basis (with closed 4h candle) gets BTCUSD closer to solving the pattern puzzle. Momentum sitting in the neutral zone and technically it is more likely to touch the lower boundaries of oversold 0-20 zone which comes with breakdown, hence why my previous 26k scenario is still valid.
So far LTF picture reveals that the previously marked levels of the triangle are indicating slightly more bearish solution of the pattern with phase I of breakdown already happening. MA50 is curving down showing slightly more bearish tendency and distributive nature of the triangle, while MA200 showing longer term direction remains stable upwards. 36.2-36.8k is the main zone to pay attention to working as local supply. As long as BTCUSD stays below MA50+VWAP cluster, we could expect bearish breakdown and retest of low 30k levels.
Hourly chart shows the interior of the triangle to be leaning slightly more to the bearish side. After topping out around 42k, BTCUSD marked lower high followed by a breakdown of bear flag which usually shows downside continuation. At the same time, the way I interpret this, is that triangle being the most neutral pattern brings little evidence which direction the breakout should follow. Every intraday pattern/formation is much more vulnerable because higher range timeframe is showing lack of direction. Patterns work best if there’s a prior trend established. No direction means no trend and lots of traps, fakeouts and best-looking patterns being easily disrupted. Which all together brings us to the same conclusion, that 35.5-36.8k is a complete no-trade area with the biggest neutrality rate. Until either direction is reclaimed with 4h, 12h, 1d candle close through the either boundary, BTCUSD remains neutral, leaning slightly more to the bearish side of my 26k scenario.