Bitcoin price action has been showing exhaustion for the past few days now so not too surprised that we finally corrected. Perfect timing for the tether FUD to act as a catalyst again, although this time things are a bit different it seems.
If you recall in October 2018, when Bitfinex lost yet another banking relationship, everyone piled out of USDT into other stable coins, and apparently into bitcoin, spiking BTCUSD to $6750 in a matter of minutes. This time round there hasn't been that rush into BTC, in fact quite the opposite, maybe people are starting to become immune to tether FUD after the upteenth time!
The New York Attorney General seems to be on Bitfinex's case about a $850 million shortfall which was covered using tether holdings, although this is all narrative yet again imo unless Bitfinex is actually in financial difficulty which I find quite hard to believe based on recent trading volumes at the exchange.
Most traders have been watching for the daily SMA50/200 golden cross when this actually gave us a false signal in 2015 on the 1st attempt with price crossing back below both moving averages after the first attempt before finally crossing months later. I believe we have the same situation today.
If you go back to 2015, a more reliable golden cross was actually the daily EMA50/200. Whereas SMA50/200 had a failed cross on the 1st attempt, EMA50/200 hadn't actually crossed on that attempt, instead we had EMA50 kissing EMA200 before dropping back and the only cross we had was the actual buy signal. Today, we currently have EMA50 kissing EMA200 but we probably won't have the golden cross just yet for a few months to come imo.
Looking back we seem to be printing a large bear flag with a flag pole reflecting a 63% drop from the pole height to our 2018 lows. I suspect we have 3 options here depending on which support holds, although I still believe the 3rd option is most viable:
1) Bitcoin drops back to and finds our uptrend support around $3800 before going on to print a higher high.
2) Bitcoin drops below our uptrend support back to the trendline resistance turned support from our ATH, somewhere around $3300 before breaking back above our prior uptrend support and the $4-4.2k horizontal resistance.
3) Bitcoin breaks down from bear flag support. The target is based on the same pole height from the recent $5600 resistance which gives us a target of around 2k. From 5k, I think we head back to our $4-4.2k horizontal support for a failed retest. After 4k doesn't hold, $3800 will probably not hold either and we'll head back to support of our main trend line from our ATH which we broke above in March, to somewhere around $3300. We should bounce from $3300 back to our $4-4.2k horizontal resistance and flag support turned resistance, in the process printing a right shoulder of a larger H&S pattern which will have us targeting $1850 - $2100 after breaking neckline support.
Both targets coincide with strong horizontal support around $1850 and a 1.214 fib extension of the flag pole height, although we could potentially have a 1.382 fib extension wick down to 1K with enough sufficient panic since we only had a 38.2 fib retracement recently.
We also have strong sell signals on the daily NVT, the weekly NVT, with no buy signal yet, and we're just about to have a bearish DMI crossover with strong ADX trend!
Good luck and happy trading!
Here is the 2015 scenario. Notice the EMA 50/200 cross, the 1.272 fib extension, the NVT buy signal after bottoming, and the 60% drop from bull trap highs :
As far as I know, H&S is not a continuation pattern (more like a reversal pattern) so this is very unlikely in a downtrend. Also, not sure why you are using exponential moving averages on such long timeframes vs moving averages. EMV are generally used on shorter time frames but either way the result is similar. For example, the 50 Weekly EMV had a lower resistance in the vicinity of $5200 depending on exchanges but EM had $5600 which we have just reached. So far everything is playing exactly as per the 2014-2015 bear market, exact falls, exact timeframes, exact fractals so it would be highly unlikely to break the 200WMA support. I do believe we will see a drop to around $3400-$3800 range though but nothing sub 3k.
You only need to backtest to see that the EMA50/200 is more a more reliable buy signal on the daily compared to SMA50/200 which has given numerous false signals, including most recently. We do have significant support between $3.8-4.2k but if that doesn't hold I'm not convinced weekly SMA200 is going to hold and there's not much holding things up at 3k. It seems that 80% of CT thinks we have already bottomed. Maybe you're right and we find support above $3300 but I'm guessing we bottom around October later this year.
CryptoEngineering
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My recent altcoin strategies are also depending on BTC. Let's see how it goes!
TheCryptAlpha
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knowledge is power.
SpotTheBreakout
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This is a very well written and thought through idea! Great work.