Crypto Trading and Chart Pattern Recognition

Good Morning Fellow Cryptonians

I hope you are all well. Now let’s see what the market is telling us.

We can see we are forming a triple bottom. Shown as A, B, C in Chart 1 – Daily Time Frame (Attached). The sellers have retested the last low of $31,000 by the dollar. Same exact figure as the 23rd of March, exactly $31,000! Before this (triple bottom) is confirmed, we need to be breaking through the resistance level which at the moment is around the $38,000 level.

This triple bottom is a bullish chart pattern used in technical analysis that’s characterized by three equal or similar lows, followed by a breakout above the resistance level, it’s a good sign, but has not been realized yet, so we need to wait for the confirmation.

A Dragonfly Doji Pattern has appeared in the daily chart as I am typing this. The Dragonfly Doji Patter indicates a possible trend reversal as buyers start getting some strength, hope, stamina and belief back into the market. (See Doji Explanation image attached)

The old symmetrical triangle that we have used as a channel for the last few weeks has been obliterated, and we are now left with a support line at $31,000 and a resistance level at $34,600.

On Chart 3, we can see the 3 support zones at $31,100, lower white line, and the TDI trending up [point 1], the Stochastic trending up [point 2], and the RSI also trending up [point 3] the MACD is showcasing that the sellers are losing momentum. All positive signs on a larger time frame.
As mentioned in previous posts the $30K to $35K is where a lot of big buyers bought, I mentioned many times that this zone would be strongly defended, and it seems so far this has held true. So I believe even if we drop lower than the previous low of $30K it will be short lived. So far we retested the $31,100 and rebounded back. Can it go lower? Of course, anything is possible. You just need another billionaire influencer coming up with another crappy meme or opinion to push this over-sensitive market down.

REMEMBER…
In a downtrend negative news are magnified and positive, bullish news ignored.

In an uptrend positive news are magnified and negative, bearish news ignored.

There are actually a lot of positive, bullish news in the crypto space, with 3 South American countries accepting bitcoin as legal tender, and moving away from the USA dollar, but no one seems to care, because they are reinforcing the desired narrative. The Doji candle might represent a change in the trend and narrative, but we need to wait if this confirms before popping open the bottle of Champaign!

We mentioned that we could move lower to retest the $30K per bitcoin in USD. Let’s look at the other scenario… Can it go higher absolutely, all markets bullish or bearish have pullbacks.

Some experts have mentioned that the main reason why they believe that we are in a bear market right now, is that we are below the 200 MA. This is a very valid point. In fact the 200-day moving average (MA) is considered a key indicator by traders and market analysts for determining overall long-term market trends. In a nut shell if the market/price candles are below the 200MA it’s a bear market, if it’s above it, is a bull market. Is this always true for macro trends? NO

On the daily chart we closed below the 200 moving average since the 21st of April, when the price was $53,000. I know, that figure feels like a life time ago.

However crypto tend to surprise us at times… As we can see from CHART 2 (Attached) we can see the 2 previous bull cycles (marked in black boxes) and the current one. We can also see that during the uptrend/bull cycle of 2019-2020 we went below the 200 Moving Average for 7 months. Normally the first year of the 4 year bitcoin cycle is bearish, the second year is a consolidation, accumulation period on an uptrend and the 3rd year is normally the start of the bull cycle. In previous cycles, there were no periods after the first bearish year, where Bitcoin was below the 200 moving average. However in this last cycle we experienced exactly this. This was a prolonged correction which started in October 2019 (pre-covid), and ended in around April 2020. The COVID pandemic intensified the situation, and pushed the price movement to stay longer below the 200MA. This entire prolonged correction lasted 7 months. Was this a mini bear market? Was this a prolonged correction? Well that’s up to interpretation of course.

The important point here, is that we can still have a Mini Bear Market/Prolonged Correction in a bull trend macro cycle. As mentioned many times in charts we can find fractals, meaning similar pattern in the small time frames as well as the bigger ones.

Now as you can see from the last black box (current cycle) in chart 2, this was supposed to be a bull cycle, but if you asked the experts, we were below the 200MA and therefore we had entered the bear market and invalided the 4 year bitcoin cycle.

The news is full of articles saying that we have entered a bear market early and that Bitcoin is dead, (Bitcoin has been dead 350+ times before, but somehow, still gets resurrected each and every time !)

As the chart is currently proving, the 2019-2020 event, was a prolonged correction, not the start of a new bear market. So their theory that each time we move below the 200moving average is the start of a new macro bear cycle is false and has been voided.

This leads us to today the 9th of June.

We have been in a downtrend since 14 of April to today, that’s nearly two months. Has it been easy? Nope. So many nights spent looking at the charts, instead of sleeping, at times waking up with alarms going on because a new low got hit, rushing to the computer to see the amount of losses for the day, and seeing the profits made during the last year diminished by the day. In these last 2 months, we had 34 days going down, 15 days going up and 12 days moving sideways.

Disheartening experience for sure.

However it is a part of the learning.

In fact in each four year cycle I am learning more and more, I am breathing, feeling, noticing little aspects in the charts that were completely foreign to me a few years ago and even months ago.

So I know that this forging of the mind, heart and spirit is a necessary step to learn how to thrive in any market conditions, being it bull markets or bear markets. My losses have become less pronounced and my wins more consistent. Which proves that we never learn when confined in our comfort zone, but rather where and when we move into the unknown. We don’t learn when everything goes our way, but rather when we are challenged, pushed against a wall and ask to look at a new, wider perspective.

Be strong, be patient, learn these life skills and you’ll never have any money issues ever again.

But be wise, and learn from as many people as you can. Test theories first with virtual money or if you feel ready with small amount of funds first. Be humble, master your emotions, master yourself and the world will become an open, blank cheque.

Be well, be safe, and stay strong

Much Light

Paolo