The cryptomarket remains coiled as we lead into the weekend with no new highs and no new lows being established for bitcoin. However, it is nicely consolidating on lower time frames and hints toward the possibility of another leg up:
Figure 1: BTC-USD, Hourly Candles, Consolidating Pennant
The pattern shown in Figure 1 outlines a potential continuation pattern called a “bullish pennant.” It’s characterized by consolidating volume and consolidating price that yields lower highs and higher lows and has general upper/lower trendlines. This particular pennant is quite sizable as it is consolidating at the top of a 12% market rally that pushed the price to test the $4,000 range. A general price target for an upward breakout of a pennant is calculated by taking the length of the run upward (called the “pole”) prior to consolidation and extending it from the point of breakout:
Figure 2: BTC-USD, 2-Hour Candles, Bullish Pennant Measured Move
In our case, the measured move for our pole is $430. If we break out upward, we can expect, at minimum, to retest the upper band of resistance discussed in last week’s analysis. And, if we are lucky, we could see a move to test the mid $4,000s.
Figure 3: BTC-USD, Daily Candles, Test of Current Highs
The current rounds of bullish pressure correspond to a breakout of a massive consolidation pattern called a “symmetrical triangle.” We are set up for a strong macro move to the upside, but we have yet to break our current bearish market structure. A daily close above the red dashed line would be a step in the right direction as this would indicate bearish exhaustion and an inability to overwhelm the current buying pressure.
If we manage to close a new high above the red dashed line and the thin purple line shown in Figure 3, then we will likely realize the full potential of the bull pennant as we test the $4,400s and (most important) the highest high of our current market structure:
Figure 4: BTC-USD, Daily Candles, Symmetrical Triangle Price Target
This is still a long way away, but there is even a possibility that we will test the $5,000 range as this is the price target for the macro symmetrical triangle consolidation.
For now, it’s very important to remain objective as we start to see strong bullish setups form in the market. It’s important to remember that we are still in a bear market and we have yet to break our current market structure. Until we see a close above our current highs, the trend is still downward.
- A low time-frame bullish pennant paves the way for a potential macro resistance test, just overhanging the current price level.
- A breakout of the pennant could yield a test of the current market structure as the measured move for the pennant is approximately $430.
- We have yet to close a new high on the daily candles, but there are a couple bullish setups on both the low time frames and high time frames.
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