Bitcoin - Breakout or Fakeout?

31 May 2022

Hello Traders, here is my analysis for BTCUSD.

Finally BTC broke out of the sideways formation that it has been trading in for the past several weeks. I didn't bother making a post over the past few days being as there hadn't been any change, but now that we've got some action it's time to prepare for our take profit levels...

One question we need to answer is... is this a breakout or a fake out?
- If BTC can close above the previous high and hold the resistance turned support at 31.4K, then this is a confirmed breakout.
- However if BTC breaks back below over the next couple days, price may consolidate for longer before trying again.
- The probabilities favor BTC holding this level and trending higher being as BTC spent several weeks consolidating first.
- As long as BTC holds 31.4K, expect further upside continuation to the next resistance levels.

***I've labeled the "Potential Path's" for BTC on the chart. These are the possible price action scenario's for BTC, just to be prepared for all situations.

If BTC Can Hold Support How What Are The Next Target Levels?
- BTC has a few resistance levels ahead of it. One at 33K, 34.4K, $37.5, and the major one around 38.5K.
- If you opened a position recently I would take partial profits at each level that is hit. Remember, the higher BTC goes the lower the probability that it will go higher.
- For example you could take 1/3 profits at each level between take profit #1 - #3 and raise your stop loss each time.
- The max upside for BTC in the short term would be around 38K in my opinion.

Is This Price Action A Correction Or A Reversal?
- It's important to try and understand whether BTC has pt in a bottom and will only trend up from here, or if this is just a short term rally and BTC will eventually trend lower.
- Looking at the chart it's quite clear to me that this is just a short term correction and is not a reversal.
- The probability of BTC heading much lower are very high according to the chart.
- If the structure of the chart changes we can re-asses but for now the chart looks overall Bearish.

Invalidation
- If BTC were to fall back into the prior formation but hold support at 28.6K, the trend is not invalidated. However if BTC were to fall below and confirm below the trend would be invalidated and we could expect bearish price action for a while longer.

Thanks everyone and best of luck trading. Also take a look at the last few posts I put out for a more detailed chart of the take profit levels and trade setup for BTC.