Hi everyone,
Today I want to discuss w-patterns whilst trading or investing in cryptocurrencies. I am going to show examples of charts (mostly weekly charts) to show you how it looks like. W-patterns often work well and prices rise afterwards. Obviously, like every indicator it will not work a 100% (otherwise everyone would use it and would be rich already), but it can definitely be a helpful tool. Use it with other indicators to confirm and see confluence. For w-patterns it is good to look at the RSI (oversold conditions or close to it, showing a bullish divergence on the RSI for example) and to the OBV (is it moving upwards or downwards ?).
Here I will show some examples of charts.
Bitcoin (BTC) weekly chart :
Bitcoin is showing some wonderful w-patterns. Look at the big one and then all the small ones inside the big one. This is very strong and the indicator OBV is confirming it. We are breaking out of 14K right now (big w-pattern breaks upwards !) and a potential target is actually 20K ! The red line I drew in here is the starting point on the left and the touching point in the middle of the big w-pattern. On the right side we see price breaking above the red line which you want to see to conclude the w-pattern. Furthermore, preferably, you create a higher low during the second low of the w-pattern (double bottom you can see). This is the case for BTC and makes the w more legit.
VeChain weekly chart :
Good old VeChain (VET) clearly shows a w-pattern on the weekly chart. The COVID-19 crash in March 2020 in crypto broke this pattern kind of , but it came back with its revenge and we broke upwards ! OBV was looking good as well and was pointing upwards for some years while price was kept down, creating a double/triple bottom.
Zilliqa (ZIL) weekly chart :
Zilliqa is showing the w-pattern as well ! A little bit different, but it is there. OBV for Zilliqa has been very strong and tells me we will move upwards. By the way Zilliqa is creating all kinds of patterns, which is crazy ! There is one big cup-and-handle forming for a while now on the chart which is generally bullish. Another one I just recently found is a potential inverted head-and-shoulders pattern ! Look at the last three green curves. It would be amazing if this one plays out. The 0,025$ area is extremely important on the weekly chart for Zilliqa. Our big w-pattern and cup got stopped out around this level, our potential inverted head-and-shoulders are forming with 0,025$ area as the top. It seems to good to be true, but if it breaks-out upwards, expect some fireworks for ZIL !
There are more examples of course, but I do not want to create a book. W-patterns are often created as a form of bottom in price action (double bottom) and prices tend to move upwards after that. If you are trading, you can find these patterns as well on lower time-frames like 4-hour charts or lower. These patterns will be less strong of course, since they are 4-hour charts or even lower, but they still work. When looking at weekly charts and investing, it takes a lot of patience to let them play out. It is sometimes hard not to buy in already. If you are very impatience, you can always dollar cost average in every week with a small amount to avoid making mistakes. If you do have the patience however, let these patterns play out and you will be able to buy in at better times (lower prices).
Here is one last example of a w-pattern, but this time on a low time-frame. This is a one-hour time-frame of Bitcoin and will show you a great example :
You will see different things in this chart and I will explain them quickly. The yellow lines are the w-pattern. The blue line that goes upwards is showing a higher-low on the second w that gets created. The green horizontal line is your buy-in area. You can buy in a little bit higher if you want to take less risk (trying to see if the w-pattern is actually going to form !), or you buy-in around this area if you are willing to take little bit more risk. Bitcoin is in an uptrend and after the first part of the w-pattern, you can assume it will create the double bottom. The red line is your stop-loss and is very important to place ! This is one of the most important things to consider when you trade. It will mitigate your losses ! The red line is at the lowest point of the first part of the w-pattern. Going below this would invalidate the w-pattern. This is where you will get out then. The last little yellow drawing with the text TRAP is something interesting. The w-pattern worked and we moved upwards, but after that we did see another decent drop to scare people and try to get them out of there long-positions. A classic TRAP, but since your stop-loss is well placed at the red horizontal line, you will not get out of your position. After the trap we went up very nicely.
By the way, when you look at w-patterns, you can also look for m-patterns. These are often created at the top and prices likely reverse down after this. It is good as well to find confluence for m-patterns (RSI for example overbought). These are also known for double tops.
I hope that this was of some help for you ! As always don’t take these things for granted. They do not always work and that is why a stop-loss is so important. If you are investing then it is always good to follow a creation of a w-pattern, because it normally indicates that the specific coin/cryptocurrency you are watching, is forming a basis for moving upwards, thus gains.
