Hello Lads and Ladies,
Everyone is looking at the possible Head and Shoulders formation playing out and I have to admit that I was one of the first people to call this formation but as soon as I started seeing this TA almost EVERYWHERE, I got very sceptical and started looking for reasons against my own TA.
First of all, this is the ugliest and weirdest HnS formation I have ever seen. We have clear breakouts from this formation, with these breakouts a double bottom at our new support, the tips of the shoulder do not match and also the bounces and volume lack completely. In my opinion this HnS is simply wishful thinking.
The very first thing that should have happened is a clear rejection from the neckline and a very steep drop.
If you watched the price and the drops, we basically had small 100-250$ drops followed by a sidewards movement. This is not how this formation should play out. We should see nice and steady drops with very small stops but not take two days to decide what to do and then start climbing down.Again, this is exactly what I mean with KNOW YOUR CHART - you might see candles and base your TA on it but only from that you don't know what happened "inside" this candle so assumptions only based on single candles is not very reliable (See also the last green candle that touched the 6800$ as we talked about it, this was only in the last 15 min of the day but it is displayed as if the whole day was just going up..)
This is already weird but still alright as long as we are going down. So the next step would have been to fall down to 6150-6050 (like the left shoulder) and then have a bounce above the candle which touched the "bottom". Again.. we saw a 250$ bounce which took almost more than 24h and during that time we have crossed 6150 multiple times and even touched 6100 yesterday. Now with all sanity, is this what should happen in a HnS formation? Is this how you bounce? Is this HnS formation still valid? ABSOLUTELY NOT.
What people expect here to happen is a beautiful bounce, a trend reversal, a movement to 7k and maybe the end of he bear market, unfortunately in my opinion everyone betting on this scenario will get slapped in the face harder than expected. I can tell you why.
For this very beautiful scenario to happen we REALLY need to find a strong bottom. First of all, since when is $6100 a bottom..? We have set a new bottom at $5800 and first we need to confirm that this is the bottom we are looking for. To confirm this, we need too come down to it again. As I see it, this MIGHT be our bottom but I consider to it a higher chance to be "the bottom before the bottom" (M.Slogget) and the longer it takes us to get to it and we keep climbing down stairs, the deeper we will go.
The reason for this is very simple and can be explained with something everyone knows here - the market bloodbath. To find a bottom we have to crash REALLY hard, we have to see these double digit negative numbers again to be really at a bottom and then not just for one day but 2-4 days straight red digits, so we are REALLY REALLY at the bottom, all indicators are down and everything is set to go up because there is nowhere else to go.
I HOPED, that we will see that whenever we touch the neckline and everything will start crashing at that point. Instead what we saw was more comparable to an easy walk down the stairs with a complete lack of any volume and momentum. The awaited $1000 bounce was only 250$ high and took two days - this is ridiculous.
Take a look at the RSI. Right now sitting at 41 points with its lowest ever point on the daily of 27 points. Do you really want to sell me this shenanigans that Bitcoin will bounce and reverse its down trend from this level? Even MACD is about to cross down and we are now supposed to see a miraculous $1500 pump? I would rather expect a $1500 drop. Saying that Bitcoin will reverse NOW and that it has found its bottom is AGAINST EVERYTHING what proper TA shows us. Not even form the market mentality, expectations, volume or momentum it is heading up.
You are supposed to buy an asset or a coin at its highest point of adversity - this is when you know that it is the bottom and you are almost guaranteed with gains because the is no other direction it can go (,if it is actually the highest point of adversity - to identify it, is up to everyone individually). Is Bitcoin right now at this point?
Since we have now all of that covered and shown that the HnS formation is basically nothing else than wishful thinking, I will show a different view on what happened in the last few weeks.
Instead of the HnS formation I see here a double top formation, which indicates us that it is going and continuing down. We were clearly rejected multiple times at $6800 and will most likely test the $5800 support once again. This would be our last chance to confirm that it is the bottom we are looking for. If we fail to do so the next stop will be $5200. Right now, the possibility that $5800 will break is increasing with every day that we WALK down and do not see a crash.
Actually, what might happen is that we will walk down like this to $5800 and just then see the drop and crash to the real bottom (even below $5200). Right now sitting at $6180 we need only $180 to 6k where we see a sideway movement again, then that one breaks, we fall down another $200 and are already sitting at our previous and yearly low. Still, without a crash, without a bloodbath, without all indicators being at the bottom. Do you really believe that we would a big bounce and start a bull market at that point? I certainly don't. The only thing that I would see there happening is a small bounce to 6-6.1k and a rejection there, from there continuing down.
As you remember the reason why we bounced from $5800 was because we have been in a market bloodbath for something around week or even more, this is not the case right now.
Since I know that many are trying their luck with BitMEX and leverage trading, this is a quote from a conversation I had yesterday: "Just imagine that you are in a trend (right now - downtrend) and in whatever trend you are, you will always have some small bounces and retracements. It doesn't shoot straight up and as well not straight down. You will always have some kind of market structure and for seeing how the market structure might look like, you use indicators. BUT you will still follow your trend - therefore it is a ground breaking rule "the trend is your friend". You can try to catch and trade that market structure, which is more risky than just going with the overlaying trend.
You follow the trend until it finds an end (in our case - a bottom) and then watch it for a trend reversal. If that happens, you are in a new trend and trade accordingly, if there is no trend reversal, you continue with what you did until the actual bottom!" - this works in a small scale as well as in a bigger scale. The last few weeks have been just market structure and nothing near a trend reversal.
I truly believe that we are very near to the end of the bear market and that we will see a bull market again THIS YEAR, there is enough and a lot aligned and ready to be published (no, not just ETFs). Yet, we need to find a REAL bottom, we have covered what is needed to find a bottom and despite all hopes, we are still in a down trend. The bottom might be near and as much as I as well hoped and wished for this HnS to play out, I have to admit that in my opinion we have not found the bottom yet and we will continue the journey downhill.
If you complain that it is not HnS but an inverted HnS your shitcoins will go to $0 :D I know it's an inverted HnS.
Make sure to check it out on Tradingview - https://www.tradingview.com/u/jegerche/
Instagram - https://www.instagram.com/bitcoin25.de/
Twitter - https://twitter.com/mreucho/
me and you will find this page interesting because I am a TA expert and day trader that does daily updates and new posts about the hottest and most discussed coins.
Cheers, Tomas