Daily Report – Bitcoin and Market Update (October 21 2020)
This second middaily session today is pushing strong. Very strong breakout is definitely directly correlated with the short squeeze activated. Neutral (at best) sentiment still left many traders shorting the breakout due to seemingly good looking risk/reward ratio – close to resistance, far from support. The truth is, that too many traders do also not realize the market context and how bullish the fundamentals has grown to become in the past months. Naturally, with 3rd halvening happening in May earlier this year, hashrate benig at ATH and global economies drowning in recessions,etc., bitcoin is currently passing the exact test and reason behind its existence given in 2008. Now it’s the perfect combination of bullish fundamentals (that suggests new ATH coming on the macroscale) and technicals. On MTF picture BTC/USD has just broken out of 2 months of sideways movement by creating a new, higher high. All moving averages 50, 100, 200 align directionally and move up providing super strong support cluster at 11k. Key VWAP support is at 8923, which could be the support in case of another black swan event – chances that It happens are close to 0 imo. Key for this middaily session is to close the day above 12460, the high of the range that just got broken out. Otherwise, it would mean a short-term fakeout if daily closes below, with support layer 11.7-12k if that happens. Next resistances are 13200 and 13900.
MTF picture clearly confirms strength of the breakout from the moment of breaking last resistance bastion at 11800s. The main short squeeze occurred after breaking 12300 resistance, after which during one session price rose to 12800 in a single move. The mechanism of the breakout based on the short squeeze remains the same, over leveraged shorts piling up with stop losses set around the August’s highs of 12470s. The stops started getting triggered in cascade mechanism, forcing over leveraged shorts to close the positions higher than open price. This combined with conditional longs opened with the break above August highs resulted in a massive pump on the breakout. Now that the new highs are made, the next resistances on the short-term scale are 13000, 13200, 13800, 14000. Throwbacks are for buying, although it’s worth observing BTC/USD price action on 4H chart in order to avoid getting fooled with any fakeout that gets confirmed if candle closes below the breakout level of 12470. Support zone given by the past volume profile of the range is 11400-11800. VWAP support at 11900-12000. Next supports are 11700 (highs of the pre-breakout range), 11600 at MA50, 11200 (S/R flip level), 11000 at MA200. If daily closes above 12470, the breakout is confirmed and should continue upwards. If a daily closes below 12470, then local further retracement down to the above-mentioned supports can continue.
Make sure you view our recent podcast with SBF Alameda, head of FTX to understand more about the markets.
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