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Happy Independence Day to my fellow Americans. As we kick back this evening to enjoy some fireworks, homemade or otherwise, Bitcoin itself seeks some freedom from the chop we've been treated to the last six weeks or so. We did have a little rally back to $40k in the middle of all that chop, interesting that. I suspect my followers and regular readers know exactly where I am going with this:
The reversal pattern has not confirmed, but if it does, this is probably a scalping play that many a trader will want to take. Disguised in all that chop is, possibly, a massive W forming across the 50 day and the 200 day EMAs. If this pattern is going to confirm I see it playing out with a fairly quick spike to the 50 day EMA and then a lot of price action leading to an all-out tug of war between bulls and bears between the 50-day and 200-day EMAs. That zone is $38,200 to $39,900. If the bulls prevail and price can definitively break above the 200 day EMA, it's going to pull the 50-day EMA back up over the 200 resulting in a golden cross. Sentiment sets us up for shorts to be annihilated through this kind of price action and then, buckle up, buttercup because price has the potential to then race back into the $50k's searching for the ATH.
Every potential rally has a potential downside... because we don't live in a perfect world and because nothing ever moves in a straight line. No one promised that the road to $100k in 2021 would be smooth, did they!? Failure to break above the 50 and 200 day EMAs would certainly confirm the sense that negativity will prevail in the market and send price back down below $30k. In fact, $28,800 forms a solid line of support going back to late 2020. A break below this line sends price in search of the 800 day EMA, currently sitting at $23,200.
Realistically, we would like to see a close above $35,400, as BTC has been trading between $35k and $35,5k most of the day. Over the last few days, we've witnessed big rallies followed by about 12 hours of chop before another rally. To wit:
Take note of the red vector candle printed last hour, which happened to follow an hourlong rally. Interesting move, that, because it reversed price right back to a pivot point after it was allowed to break out of the weekly range for a very brief time. Notice the pattern coming out of the $32,6k hole from July 2, three vector candles up over 48 hours and 1 down. Building longs, building longs, building longs, moon boy buys in, leaves his stop loss too high, stop loss hunt. We are also coming to the point in time where BTC breaks out of its chop and show direction.
Let's check the osciallators:
RSI sits at 49, nice territory for a rally, also showing a week over week improvement. The MACD is showing signs of strength, a visible recovery from the May crash.
Perhaps the market makers are just waiting for the fireworks to send price?
Enjoy the 4th!
Happy trading!
