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Bitcoin (BTC) weekly analysis: Bitcoin balances on the edge

A bear flag pattern also gives us a target (the length of the flag pole - the top of the flag is the new price target) this is exactly $ 6,000,.

13.Oct.18 6:50 PM
By Shawn Highstraw


Bitcoin (BTC) weekly analysis: Bitcoin balances on the edge
After weeks of extremely low volatility and volume, action finally took place last week. As we discussed in the past few weeks, the chances were that the breakout would be down and this happened yesterday with quite a lot of action. Let's dive straight into the graph because there is (finally) a lot to see!

A large number of analysts just started to become bullish just before the price plunged. First let's see why this happened and what we can learn from this. Figure 1 clearly shows how the price of Bitcoin has been on an upward trend in recent weeks (the red line). Together with the orange line indicating the top of the descending triangle, where the course has been going for months, a symmetrical triangle developed. A symmetrical triangle is a so-called 'continuation pattern' and since the trend is bearish, the chance of a break-out was relatively large. However, due to the red (rising) trend line, many eyes were only focused on this trend and were often overlooked that the price was still in a descending triangle. Only a sustained break above $ 6,800 would invalidate this pattern. At the same time there was a clear bollinger bands squeeze visible on the daily chart (Figure 2). In the past, such a squeeze often resulted in a strong rally in the price of Bitcoin and many analysts - together with the rising trend line - cited this as evidence of a bullish break-out. We can learn a number of things from the above events. First of all, the saying: 'the trend is your friend' strongly applies here. The trend was bearish and therefore a downward break-out was to be expected. A trend does not just turn around and that was clearly visible this time. In addition, (yes the cliché is coming) events from the past are no guarantee for the future. The fact that in the past a bollinger bands squeeze regularly led to a rally says almost nothing about this time. In this case there was a battle-of-patterns and the stronger descending triangle pattern has won. Finally, many people forgot the bigger picture. Yes, we were in a rising trend line but it did get into a descending triangle. I will not deny that my enthusiasm for a bullish breakout also started to grow, but the confirmation was not there yet and therefore I remained neutral-bearish until a break of $ 6,800 would occur. This has obviously not happened and that leads us to the next question. What now?

The current situation looks bearish. Figure 3 shows clearly how, on the weekly chart, a bearish engulfing is occurring. However, we have not yet broken through the $ 6,200 and we are still above the magic limit of $ 6,000 so at the moment we are in principle still in the same situation as last week. The only difference, however, is that Bitcoin's share has again shown that the bearish trend is still strong and active.

At this moment it seems that the Bitcoin share is forming a bear flag which can be seen on the 1-hour graph,. A bear flag pattern also gives us a target (the length of the flag pole - the top of the flag is the new price target) this is exactly $ 6,000, the magic limit!

Although we saw a strong decline yesterday, the support for the $ 6,220 proved to be strong. This can clearly be seen from the long shadows of the different candles in Figure 4. Nevertheless, a test of $ 6,000 is almost inevitable in my view and we have to take this scenario into account. In the coming week, my eyes are strongly focused on the $ 6,200 and $ 6,000 threshold. The current situation and the momentum indicators indicate that there is probably more decline in the barrel, but we are still in the descending triangle and we will first have to break out of this pattern before we really know what the course is going to do on the short to medium term. If the price breaks through the $ 6,000, in my view it is not the first support level, which is around $ 5,500- $ 5,700 - important but the re-test of $ 6,000. Support often changes in resistance if it is broken and if the price of Bitcoin breaks through the $ 6,000 limit next week, I would like to know if the $ 6,000 limit will be a strong resistance. If we had a rally in the coming week (the chance is small), a break by the $ 6,700 would change the picture considerably. At the moment the Bitcoin exchange is on the edge and it seems to be a very exciting week.

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