Daily Report – Bitcoin and Market Update (May 16 2022)
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The weekly chart has presented yet another instance of a breakout failure, this time – to the downside.
The breakout failures, known also as SFP patterns – swing failure, breach certain critical threshold – support or resistance, yet before the session comes to an end, the market reverts back in the prior direction saving the level. Failed patterns tend to perform better in the opposite direction than anticipated on the base pattern itself.
The weekly candle can be interpreted as a bullish hammer formation, as the real body stands at 31% of the total candle range, peak to trough. Combined with a weekly breakout failure pattern, it may have long-lasting implications and typically implies a reversal pending.
At the same time, having closed above 31000 USD, bitcoin has proved it wants to stay inside the prior chart pattern territory. As a result, my bearishness requirements have not been met, as the demand below 31000 USD region has been marked in the chart by the long lower shadow.
For that, I think it is more likely to see a further consolidation between the 69000 USD highs and the 25000 USD lows and inside the broadening pattern, with higher chances of reverting to the upside based on the failed breakout.
However, the CTF Trailer implies BTC can be safe for bulls only with a weekly close above the Stop $47552. Until that happens, there will be doubts about the direction and the trend.
The daily chart shows a continued attempt to build the base around the 28000-30000 USD region, in the area of the old supports of 2021, based on the BWAP block derived from price and volume.
The CTF Trailer has gone downwards and now is displaying the Stop, invalidation level, at $34851, above which the BTC bulls could be feeling more certain and safer.
Besides, there is also an essential support/resistance level at $32950, making the prior lows from before the breakdown happened. Due to the polarity change principle, this level should be anticipated to work as resistance for now. A successful break to the upside above that level, could lead to higher chances of follow-through and further upside recovery.
A failure to maintain the 25000 USD lows of fundamental capitulation correlated with LUNA and UST collapse, would arguably lead to further sell-off into the 20000-22000 USD support. So far, it does not prove likely.
The middaily chart continues trading upwards in the near-term sequence.
Having bounced off the Low Momentum Band support territory at 26000-28000 USD, bitcoin seems to be upwards-oriented toward the 33500-36000 USD resistance area, which may be quite a challenge to face.
The CTF Trailer sets the main breakout threshold at $33639, which I personally follow for my position trading. A daily or weekly close outside this level to the upside would suggest that bulls have re-gained the control over the market and will hold the upper vote on deciding directions.
In other words, above that level I would argue that supports and more likely to be held, while resistances are more likely to be breached.
The dark orange shade on the Low Band beneath the price action suggests that the momentum is oversold and that the downwards trend has slowed down significantly. Potentially, this may be yet another hint the market is setting up for a reversal.
If not disrupted by exogenous factors, like the FED’s policy change, unpredictable cataclysm, Russia-Ukraine war escalation (watch Sweden and Finland considering to join NATO), bitcoin may be due for an upwards recovery soon.
The MTF chart suggests the most relevant short-term levels to watch for bitcoin.
The Momentum Bands suggest a resistance area 31.5-32.2k USD, defined by the recent volatility outputs. This zone also aligns well with the Level Line resistance at 32268 USD, as well as the CTF Trailer Stop at 31359 USD. As a result, I would suggest one take the 31359-32268 USD as a one instance of supply zone.
A clean break outside the said resistance region, could lead to a more explosive movement to the upside. However, the regular volatility allows for bitcoin to reach the lower boundary at 27500 USD, and still maintain the “bullish reversal setup” pending.
Besides, BPRO Level Lines show resistances at:
The hourly chart is overlayed with the Wave Pivot indicator of the BirbicatorPRO.
Currently, it is showing a cluster of most relevant short-term supply and demand regions, defined by the key swing points in the chart.
As of now, BTC seems to be in the very middle of a local range given at 28400-31300 USD. A clean break and close above the 30400 USD resistance could lead to a further upwards continuation into the upper range extreme, whereas a valid breakdown below 29600 USD increases the chances of retesting the lower boundary.
If taken outside the said extremes, bitcoin may be due for a more explosive movement with an abnormal volatility burst, causing a cascade of liquidations and riskier trading environment.
Tight and precise protective stops application, and sound money management should be applied, especially in the short-term trades.
The index is at 14 points on the scale, out of 100, for now.
It does seem to me (and let it be my perosnal opinion), that the fundamental capitulation event had already taken place with the UST LUNA collapse, which marked off the selling & panic climax – seen in the chart attached.
As explained in the last report: “As traders, we all undergo emotional processes and perception biases, which distort our reality reading skills, due to cognitive biases – faulty reasoning, human errors, and emotional biases – driven by fear and greed. Regardless of the type of the bias, every time such a bias can lead to a mistaken conclusion regarding the market performance and cause irrational decisions.”
For this reason, I would not be surprised if bitcoin has actually bottomed out already, with a first instance of direction change on the weekly hammer candlestick – an actual first instance of a follow-through to the upside on the intraweek basis, where the past actions had failed.
While this is not confirmed, it is unquestionable that rarely ever had bitcoin reached this amount of pessimism and bearish conviction from the speculators side. More often than not, the majority is wrong at the extremes.
More details will be shared in my premium video report. Hope it helps!