9 months of bear market have most traders uninterested, hesitant to buy, and disengaged. Exchange daily trading volume on most Altcoins is at a low, and the Altcoin Massacre has taken place. Volatility in the last 2 weeks has been quelled, what in the world is next?
Short Selling Analysis
The above chart references Bitcoin, BTCUSDSHORTS short selling on Bitfinex, and RSI.
The green rectangle on the BTC chart highlights the area of true support, Bitcoin’s current relative bottom range. We’re going to identify this area with a range low of $5,720 and range high of $6,100.
SSP, short selling pressure is represented by BTCUSDSHORTS, the red line charted below BTC.
The Yellow verticals lines represent where the cautious successful shorts entered the trade. Cautious shorts are the short sellers, selling while the short selling is at it’s lowest for that time period. Successful short selling is defined by a price decrease after selling. the red price decrease rectangle on BTC represents the profiting of shorts, up to %30 for that time frame.
The Green Arrows represent the decline of shorts from period high to period low. Decline is shorts is triggered due to an increase of Bitcoin price.
The Cyan Rectangles represent unsuccessful short activity, shorts entering the trade at selling climax, or SSP.
Accumulation Schematics, what would Wyckoff do?
BTC isn’t quite demonstrating classical Wyckoffian phases, but given the data from the BTCUSDSHORTS chart, an actual selling climax is easy to spot.
For reference, we’re utilizing StockCharts.com schematics.
April’s selling climax, Phase A is identified and validated by the Cyan rectangle on BTCUSDSHORTS. Phase B is discombulated somewhere post Phase A, as the Short Squeeze resulting from the SC produced too strong of a rally, hence a secondary test in Phase B is missing.
Phase C, the Spring, BTC experienced a lower low on less selling pressure. The period from June 10th, through July 17th.
Phase D and E, is this where Richard Wyckoff (November 2, 1873 — March 7, 1934) throws in the towel? I can’t remember if he died a poor man or a rich man. And let’s face reality, if old schematics are still applicable since the early 1900s, then markets haven’t evolved.
As for the current Phase, BTC is experiencing another Selling Climax. Hence a second test of the Spring at a selling climax.
Hence I believe that Phase B is occurring in Phase C, for the lack of an earlier Phase B. Market Maker and “smart money” decided to revisit accumulation levels one more time.
Philosophers died poor, let’s look at Technical Analysis
The inverse head an shoulders pattern played out, these typically signify the end of a downtrend. Let’s define downtrend before proceeding.
“Downtrend: a series of lower lows and lower highs.
And in this instance Bitcoin rallied to $8400 afterwards hence achieving some what of a higher high than previously. The move was fueled with “news” and ETF speculation, adding much fuel to the bulls.
Market moves often require a re-test. A retests of an inverse head and shoulders typically occurs at the neckline, and in this instance the neckline failed to hold. As a matter of fact there was no support at the neckline.
Yet bitcoin price held up at a higher low than previously.
The current consolidation patter is an ascending triangle. The initial breakout during Bitmex’s downtime was a “false breakout” since then BTC price revisited the triangle, before once again breaking out to the upside, into a range where the earlier breakout did not consolidate.
VPVR on the right of the chart displays Volume Profile Visible Range.
Hence volume according to price.
Low Volume nodes are more easily traversed by price than high volume nodes. The current Low volume node is overhead, making our next target for BTC $7254.
Link to Trading View Trading Long @ $6,040
Selling Climax, and Momentum
A study of the RSI, during a period of a selling climax on BTC demonstrates that an incoming rally is incoming. Currently daily RSI is at 52, indicating that momentum is to the upside.
The previous area of overbought at the breakout resulting from the inverse HnS indicated that there was much momentum to the upside. And the following revisit of RSI lows, RSI failed to break below 30 and resulted in a failure swing.
A failure swing is the one of the first early signs of an incoming reversal.
The Bearish Scenario
My Bear friends are tooting a Bear Flag on the daily chart, and others a rising wedge. Along with price currently consolidating at the upper Bollinger Band, where profit takers take profit and short sellers sell.
Hence a pullback might be in the books, one to the Bollinger Band median, would be healthy. As long as previous previous lows are intact, I would add to current margin long Bitcoin Futures positions, so long $5700 holds intact. And would consider it a gift.
ETF news has most retail hoping for “new money” to enter the market in the form of investment vehicles. The initial 2 ETF rejection from the SEC resulted in the current ST, Secondary Test of previous Spring. And another Selling climax. The third ETF rejection of ProShares ETF proposals was priced in, and had no impact on the market. Even though many short-sold the news.
I’m unaware of her sources, but markets tend to rally at capitulation when everyone has thrown in the towel. Hence I believe sentiment and the masses are currently exhausted, hence the selling is at a climax.
Which puts our firm, and myself at a contrarian view. Currently long and expecting our Margin Long December Futures Contracts to be very profitable in the coming months.
In closing our firm believes Bitcoin has seen “Bottom” with a range low of $5,700 and a range high of $6,100. And we’re currently trading accordingly.
Author: George Saber (Check out my BlockDelta profile here)