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Bitcoin - Short Term, Part II (Watch Out Shorters!)

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Bitcoin is very close to breaking out of the recent downtrend. Volume is still pretty low, but that only shows indecision by the market. Demand has been sufficient enough to keep it from even testing the $6800-7200 major support area. Time is running out for the bears to take prices down there, in my opinion. We could fall towards $7300 on another dump, but I'm posting this as a long setup because I think it could catch many by surprise, particularly those in short positions. Many are still expecting a further drop as well, but the price action by Litecoin is very bullish. LTC has been a leader of the market since February. The Litecoin reversal is what allowed me to speculate that the crypto market bottom had already been reached. Additionally, it has surpassed even my medium-term long trade final target of $130, which means the market may be even more bullish than I expected.

If we break this recent downtrend (orange) with some volume, I think prices could shoot up fairly quickly to test the 9K resistance again. Interestingly, that coincides with the previous parabolic uptrend that was broken (dark blue). If that happens, we will have to reassess the market based on how things unfold. This is only a short term idea. Further downside is possible, obviously. If bears can gain some confidence and break the $7200-7300 support, things could get ugly quick. For potential downwards movement, it's important to keep an eye out for the orange support (since March) and the light blue support (long term bullish trendline). And of course sell volume, but that keeps decreasing as well.

This is not financial advice. Just something I'm seeing, and I'm curious about whether or not it'll play out.

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-Victor Cobra

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Looking at the shorts, it looks like they could be primed to explode to the downside. At the previous bubble peak, they were at much lower levels. Anything can happen, but a massive short squeeze wouldn't surprise me here.

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Also, longs are at a major support level. If we're in a bull market, margin longs could gain some confidence if price and volume start to look strong again.

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Chart zoomed out so you can see where all the lines are coming from:

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We have an hourly candle close above the resistance for the first time. Let's see if it can hold.

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Volume has declined again, as bulls don't have conviction to break the $8100 resistance yet. That's the area that needs to go down if we're to see higher prices in the short term.

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On the Coinbase chart, Bitcoin actually looks a bit more bearish. The pink trendline is actually the long term log support from the previous bull market. After breaking above recently, it's back below. However, a break back above it would be a bullish signal. Interesting to note.

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Zoomed out. May do a separate post on this.

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BOOM

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Also back above the important trendline on the Coinbase chart. Continuing to keep track of this. I always like to analyze price action on multiple exchanges to gauge overall market movement. It's what allowed me to predict the breakout from the 3K area.

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Quick update - we're back at $8200, but with considerably lower volume. This may be a sign that bulls lack strength to actually push us up any further from here. Volume is decreasing on this current move up, but we should't see any real volume come in until a potential short squeeze (which doesn't have to happen). We'll see how this unfolds.

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Moving up on decreasing volume is usually not a good sign, particularly at a major resistance level. If it breaks, volume will come in. It also could mean no one wants to sell at these levels either. The movement will be dictated by the next high volume swing.

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On Coinbase, it's very important that we hold above this line, as it would be the pivot area between med. term bullish and med. term bearish.

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Chart illustrate declining volume. If bulls can't push us through here with a high volume move, we could even backtest the $7800 level and still be above the broken downtrend.

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We also could be in a wedge with decreasing buy momentum.

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This would mean we could see a quick test of the top of the wedge ($8300 area) before a rejection. This would also align with the first major target of this setup.

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Looks like this idea is still in play, since the first target of $8300-8400 has been reached. Congrats if you held a long through the uncertainty with the wedge over the last day or so. It's looking like the wedge actually wants to break to the upside. If it does, 9K+ is possible fairly quickly, I think, since a lot of people are trying to short this, assuming a head and shoulders top that hasn't played out yet.

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Obviously, reaching the next target only becomes more likely if the wedge does break to the upside, but it hasn't yet.

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Really making an effort here:

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After breaking the wedge to the upside (second long setup within the larger setup), Bitcoin has surpassed my second target around 9K, but in reality, the target is the previously broken uptrend (dark blue), which is just overhead. Should we blast through there, we're looking at potentially getting up well above 11K in short order. We'll see what happens!

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Shorts are providing fuel for this rally:

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The target at the blue uptrend has now been reached. Will be abandoning this idea for now, as it ended up playing out perfectly (despite some initial doubts). Onto the next one : )

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This was a short term trading idea, and the target was reached, so will have to reassess for another possible setup (for example, if we happen to continue higher from here, fueled by a short squeeze), or if we get rejected, continue to consolidate, and alts run.

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If I had been around this past weekend, I probably would have posted another short term trade idea for a long setup once that blue uptrend was reclaimed. Bitcoin is getting close to the top of the long term bullish channel (light blue). Will post a new analysis soon.