Hi friends! Welcome to this update analysis on Bitcoin! Let's get right to it! Looking at the four hour chart, you can see that BTC is testing the neckline resistance of the inverse head and shoulders pattern, as it prepares for a breakout. BTC is actually building a small bull flag just below, and it appears as though a breakout is inevitable. Volume is very light, but I wouldn't be concerned with the volume until the breakout. A lot of people have been talking about the low volume in the right shoulder, but it is typical for volume to decline as price action approaches a breakout zone. Traders will step to the side, and await a breakout confirmation, before jumping back into the market. That's the psychology behind the volume decline in the right shoulder. With that said, we can use the 20 EMA (in blue) as a strength indicator for this move. You can see how well BTC has been respecting the 20. From the low on 2/25, it rallied up and corrected into the 20 EMA , as it converged with the top of the channel. Then you can see that it rallied higher, and corrected to the top of the black trendline , which was nearly converging with the 20 EMA again. Then we had a rally up near the neckline, and a corrective move back to the 20 EMA , and now here we are testing the neckline again. So, if BTC starts to retreat, and it takes out the 20 EMA in blue, that would be an indication of short-term weakness.
The MACD doesn't look very strong. It's just sort of trending sideways with no real momentum. This concurs with the decline in volume on the chart, and shows us that traders are just hanging out on the sidelines, waiting to trade the breakout. If/when the breakout occurs, BTC will run into resistance at the previous highs. The first level of resistance is at 11788, followed by 12198, and then the heavy resistance at the 50% retrace, near 12750. The overall look of this chart is very constructive and bullish . You can see that BTC has been stair stepping it's way higher, without any parabolic movement. The momentum and volume also have plenty of upside potential, so BTC could find some nice upside on the breakout, should the volume and momentum pick up. Other than that, we're just waiting for the breakout.
For educational purposes only, if you want to go long on the breakout, you can buy at a confirmation above the neckline — meaning a retest and a subsequent rally, or a strong breakout on heavy volume , or a candle that closes above the neckline. You could place a stop order somewhere slightly below the neckline, perhaps below the 61.8% retrace, if you're willing to accept some risk in the name of extra room for volatility . It is important, however, to wait for a confirmation of the breakout, to take any new long positions, unless you are long already. Good luck trading everyone!