Bitcoin's diamond/double bottom is playing out
Updated
Good morning, traders. Bitcoin appears to be working on the bounce that I discussed was more likely than not during the live stream last night. However, we must remain aware of the potential for a dead cat bounce rather than a full reversal of what may just be a corrective leg down since the $8500 high. This recent upward momentum has pushed price above the descending wedge's resistance and closer to the local descending broadening wedge's resistance (denoted by the dotted black lines). We continue to expect price to challenge the top of the large descending broadening wedge which started printing at the $8500 high.
As I mentioned, a move up from the recent low requires advancement through various stages. The first is that we need to see a strong close above the recent swing high at $7153.60. Zooming out to the 4H chart shows us that an Eve and Adam double bottom formed (another way of looking at the double bottom is that it formed a "W" pattern) which means that a breach of that swing high sets up a target of $7438 which we get by measuring the distance from the bottom to that swing high and then adding it to the latter. This double bottom is also part of the diamond I have mentioned was likely forming the past couple of days. If price manages to breach $7300 and head toward the double bottom target, then it makes a compelling case for targeting the previous box at $7630-$7800. Along the way, we have a couple of 1H boxes that should provide some temporary resistance at $7230-$7280 and $7380-7420. The top of the daily cloud resides just above the 23.6% level at $7876. A close above this would mark the first time price has been above it since January.
As we can see on the daily chart, price bounced near the 61.8% level and a good breach of $7130.90 gets it above the 50% level thereby suggesting a possible trend reversal from this recent corrective leg of movement. The daily pivot sits around the 38.2% retracement level of $7455.60 and a close above it is bullish. Daily RSI and OBV are bouncing off their supports and StochRSI has completed a bullish cross at the bottom of oversold.
As I mentioned, a move up from the recent low requires advancement through various stages. The first is that we need to see a strong close above the recent swing high at $7153.60. Zooming out to the 4H chart shows us that an Eve and Adam double bottom formed (another way of looking at the double bottom is that it formed a "W" pattern) which means that a breach of that swing high sets up a target of $7438 which we get by measuring the distance from the bottom to that swing high and then adding it to the latter. This double bottom is also part of the diamond I have mentioned was likely forming the past couple of days. If price manages to breach $7300 and head toward the double bottom target, then it makes a compelling case for targeting the previous box at $7630-$7800. Along the way, we have a couple of 1H boxes that should provide some temporary resistance at $7230-$7280 and $7380-7420. The top of the daily cloud resides just above the 23.6% level at $7876. A close above this would mark the first time price has been above it since January.
As we can see on the daily chart, price bounced near the 61.8% level and a good breach of $7130.90 gets it above the 50% level thereby suggesting a possible trend reversal from this recent corrective leg of movement. The daily pivot sits around the 38.2% retracement level of $7455.60 and a close above it is bullish. Daily RSI and OBV are bouncing off their supports and StochRSI has completed a bullish cross at the bottom of oversold.
Note
We can see the CME Bitcoin futures gap starting to fill as I spoke about yesterday was likely to happen. This should see the printing of a bullish engulfing candle on the CME daily which would signal a likely reversal in price.
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