Trade Recommendation: Bitcoin
We’ve been watching Bitcoin (BTC/USD) closely ever since it started forming a falling wedge on the daily chart. This was an indication that the market was becoming bullish even though price, volume and volatility were gradually dropping. Bears used these indicators to argue that Bitcoin would soon breach support of $3,200 and nosedive to monthly support of $1,800. From their perspective, if no one’s heavily buying at current levels, it means that the market is likely to resume its downtrend soon. Needless to say, their assessment was wrong.
Technical analysis shows that BTC/USD breached resistance of $3,500 yesterday, February 9, 2019. This triggered the breakout from the falling wedge on the daily chart. Anyone with an objective stance knows that a falling wedge is usually a bullish pattern. It results in a break to the upside in seven out of ten times.
In addition, the slow drop in price, volume, and volatility are all properties of a falling wedge. Notice how this pattern begins wide at the top and it slowly contracts as it approaches the apex. While it slopes down, volume and volatility gradually drops. This happens, not because buyers are not present but because sellers are gradually losing ammunition. The buyers or the smart money will likely position at the apex to get the best possible price, which then triggers the breakout.
Now that Bitcoin has broken out of the wedge, savvy traders do not buy the breakout. Instead, they wait for the throwback and buy the retest of the breakout.
The strategy is to buy on dips as close to $3,500 as possible. If bulls hold this level, our initial target is our range high of $4,300.
The process may take less than a month.
Daily Chart of Bitcoin/US Dollar on Bitfinex
As of this writing, the Bitcoin/US Dollar pair is trading at $3,724 on Bitfinex.
Summary of Strategy
Buy: As close to $3,500 as possible.
Disclaimer: The writer owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.