BTC in spike and channel formation: Pullback ahead?
The end of the downtrend? Well, maybe not yet, but we see a spike and channel formation.
How to trade this formation?
The sharp drop from 11.000 to 9.900 is the spike on the 30m chart. At the end of this movement you could see a downtrend channel, but that channel was quickly broken when BTC made two nearly equal legs up to 10.500.
This is not a place to go long, just the opposite!
Prices were rejected by the EMA and quickly dropped to a new low around 9.800.
We see typical price action in a strong downtrend, because it creates a trap at 10.500 for longs and one for shorts at 9.800.
Now we can draw a broader range, which is a slightly downwards pointing channel.
This was confirmed when prices bounced above the EMA.
Now a lot of people would call this a double bottom or a head and shoulder reversal formation, looking to the upside when prices broke above 10.360.
And this is were the next bull trap happened!
What the trap looked like? After the break of the prior up move from 9.800 to 10.350 we got a pullback to the EMA and two small pushes up above the resistance at 10.350.
Just to our upper range/channel line!
By following price action rules you would have switched to range trading mode : Keep watching those upper areas and still look for shorts.
The upper channel line was confirmed several more times after that, and two more short entries could be found at these key entry points.
At the second entry the momentum to the downside picked up and prices went straight to the lower side of the channel and beyond. But why beyond?
Think about equal legs: The first leg was the spike, the target for another down move is the equal length second leg. It has reached that target at 9250 to the tick ;)
Markets like to create symmetric moves and second legs, second entries...good stuff :)
So, what about that pullback from here?
The downtrend has played out well, therefore i would expect a pullback from here to at least 9.700 (resistance).
The broader channel could still be in play, because often there are fake breakout. If BTC moves back in the channel we might see 10k again.
How to trade this formation?
The sharp drop from 11.000 to 9.900 is the spike on the 30m chart. At the end of this movement you could see a downtrend channel, but that channel was quickly broken when BTC made two nearly equal legs up to 10.500.
This is not a place to go long, just the opposite!
Prices were rejected by the EMA and quickly dropped to a new low around 9.800.
We see typical price action in a strong downtrend, because it creates a trap at 10.500 for longs and one for shorts at 9.800.
Now we can draw a broader range, which is a slightly downwards pointing channel.
This was confirmed when prices bounced above the EMA.
Now a lot of people would call this a double bottom or a head and shoulder reversal formation, looking to the upside when prices broke above 10.360.
And this is were the next bull trap happened!
What the trap looked like? After the break of the prior up move from 9.800 to 10.350 we got a pullback to the EMA and two small pushes up above the resistance at 10.350.
Just to our upper range/channel line!
By following price action rules you would have switched to range trading mode : Keep watching those upper areas and still look for shorts.
The upper channel line was confirmed several more times after that, and two more short entries could be found at these key entry points.
At the second entry the momentum to the downside picked up and prices went straight to the lower side of the channel and beyond. But why beyond?
Think about equal legs: The first leg was the spike, the target for another down move is the equal length second leg. It has reached that target at 9250 to the tick ;)
Markets like to create symmetric moves and second legs, second entries...good stuff :)
So, what about that pullback from here?
The downtrend has played out well, therefore i would expect a pullback from here to at least 9.700 (resistance).
The broader channel could still be in play, because often there are fake breakout. If BTC moves back in the channel we might see 10k again.
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