It has been a roller coaster ride in the Crypto market with optimism this was the next leg up to 20k followed by a six month correction. Regardless of the market correction the trend is still overall bullish on broader time frames and that is always our guide.
Stocks pushed new highs and had a record breaking year, but as we enter 2020 optimism is starting to get a little frothy, and though we are bullish on stocks, we are looking for a minor correction.
Gold had a great year, and the broader chart is telling us that there is more to come. So do you jump on the train here?
And of course we review our trade of the week, if you tuned into our radio show or listened to the podcast.
Though many may look at this as a bearish series of lower lows and lower highs, this is not part of the broader trend. It is important to separate out trending equities from consolidating or equities that are correcting after a strong bullish run.
What we have here is a consolidation after a strong bull rally, and the key level to hold is 6000. There is also a bullish pinbar that is forming as an inside candle on the monthly without a significant new low.
This is a failed low situation and a push above 8000 would be a bullish sign. The key level here to hold is 6000. I am repeating a lot from the previous analysis, but nothing has changed.
Bulls need to see a move above 11,500 to confirm the consolidation is over, and bears need to see the technical level of 6000 taken out which has a high probability of retesting the previous low around 3250.
We are not going to guess, we are simply going to let the market play out.
On the weekly chart, we get a better idea of the sub structure of the corrective cycle which is playing out as a bullish flag. Funny how on a 2 hour chart a bullish flag matters, but on a weekly, “ahhh it’s a bear market”.
Quite the contrary, the weekly holds much more weight than a 2 hour chart or even a daily. The reason is we are seeing through price action, order flow.
The November push through the 7750 level was solid, but buyers did step in and pushed prices back up to the previous support level which is now resistance. What we want to see here is a push through resistance at 7750 and follow through.
There is also a lot of resistance between the 8900-9650 which needs to be taken out. In short a lot of work for the market to start attracting the attention of those sitting on the sidelines waiting for some confirmation.
From a support perspective, there are several overlapping proportional levels between the traditional support at 6000 and 7250. The horizontal price action is evidence that buyers may be accumulating here, but we need to see the 7750 level taken out to confirm this.
For one if you are short the market, the 7750 area is where one would likely be placing a stop depending on the time frame, so a potential short squeeze if this level is taken out.
On the other hand, those that sold at higher levels and are looking to get back in, want some sort of confirmation. Taking out this level would attract some of the more conservative traders / investors.
Remember most are looking for Alpha, and right now the stock market is hot. Why direct money into something that is not if you are a trader? We need to see the inflow of monies back into Bitcoin and a series of higher highs, or taking out resistance levels is can attract new money.
On the daily chart, the resistance is real and a lot of it. From 7450 to 8500 there is a lot of resistance, and sometimes it takes weeks to break through, but once it does, a swing into the low 10k’s is likely to come quickly.
A potential failed low in December, which is playing out as a Inverted Head and Shoulders, is a likely sign we are seeing the bottoming process play out. There was another long signal four days ago, and in the shorter term time frames, this is the level that needs to hold (7050).
Right shoulders, left shoulders a neckline and head are only indicative of resistance levels and order flow. The 7600 level is a key resistance level or neckline and the right shoulder is simply a potential higher low off a failed low (the head).
Do not get caught up in patterns that often develop randomly, it is perspective, position and price action that must be considered as well.
We are in a major support area, so the position is correct for a reversal. Price action is showing us that buyers are stepping in at these levels and that any selling action (as we saw in mid December) is quickly absorbed pushing us back to the resistance area.
What we want to see next is a breakout and price remain above the 6850 level for the pattern to be in play. Again it is not the pattern that matters, as often patterns form randomly and never trigger, it is all about order flow.