Sometimes, when we publish or analysis, things go wrong. More often than not, things go in our favor, and we are able to draw a profit form the markets buy setting up against either side of action and crossing our fingers. Every so often, things go exactly to plan. Yesterday afternoon, we got the latter. It came at a welcome time, as well. We’ve had a pretty tough week in the bitcoin price this week, with action initially remaining relatively stagnant and then going on to chop us out of a few short trades. As we always say, however, best to stick to the strategy and its rules – otherwise maintaining a strategy would be of little use.
So yesterday afternoon, having traded sideways for a few hours, post-decline/recovery that we discussed in yesterday’s analysis, the bitcoin price broke to the upside and buyers sustained the run to immediately take out our target. We mentioned, again, as part of our analysis, that a short squeeze could come into play – and it looks as though this may have been what happened.
The bitcoin price topped out at 391.88 – levels not seen since we broke below 400 early last week, and has since ranged within a pennant. A pennant, in traditional technical analysis, is a sideways triangle within the price of said asset ranges towards a singular tip. It generally suggests a continuation of bullish action in an uptrend, and the opposite in a downtrend, It completes when price breaks either support or resistance (in this instance it will be resistance), and on entry, gives us a target equal to the height of the pattern.
We can use both this pattern and our standard range approach for today’s session, with the triangle entry being the more aggressive of the two and the key level, range entries being a little more conservative.
So, without further ado, let’s take a look at what we’re watching today, and see if we can’t get some positions outlined that enable us to get in and out for a profit. As always, get a quick look at the chart to get an idea of what’s on.
The chart shows both the current range, and the sideways pennant (outlined in red). The range is defined as in term support at 383.39 (the swing low the succeeded the upside run), while in term resistance comes in at the aforementioned intraday highs at 391.88. Support and resistance for the triangle is variable, and defined by the breakout point.
So, if the triangle breaks to the upside, we’ll go long on an aggressive entry towards 400 flat. A stop around the lower channel of the pattern will define our risk. If triangle support breaks, it invalidates the pattern and we won’t enter.
If price breaks resistance, it will set up a more conservative entry once again towards 400 flat, with a slightly tighter stop available at 388.
To the downside, a break below in term support at 383.39 will put us short towards 373.96, with a stop around 386 flat keeping things attractive from a risk management perspective.
Charts courtesy of Trading View