As said previously in my analysis, the price has drifted between the $3,950-$4,000 level more than 8 days with some small exceptions.
The price has printed a nice consolidation area around the $4k (yellowish box) but it starts to show some weaknesses inside of this box.
First of all, it is below the major counter and if the 4H candle gets a close below of it then this would be the first bigger sign but as you noticed then this is not the full confirmation because the price is still inside the yellowish area.
The second, the third and the final confirmations come as 2in1 and it comes after the 4H candle (4H candle close confirms more securely than the lower time frames candles) gets a close below the $3,940.
Let’s start from the beginning – after the close below $3,940 we get three breakout confirmations:
1. Break below the trendline/counter trendline:
Currently, this black has held the price multiple times and if it gets cracked then those counter breaks have usually worked pretty nicely as short-term trend indicators. The overall and the bigger trend is still downwards (we have some signs that this could be over but not yet) and if this up-trendline gets cracked then the market starts to follow that bigger trend for a while – it depends how strong this trend is. Recently, has made pretty nice movements and I could assume that this correction can’t be so deep but we have to take step-by-step after the break.
2. Breakout from the consolidation area:
Usually, after the downtrend or after the uptrend price takes a pause which is called as a consolidation or a ranging market. Bulls and the bears fighting each other, no one can’t win any bigger battles and that’s why this area occurs. Now, if the price makes a breakout from either direction, currently downwards, then it will show that bears have won a battle around the area and they continue trying to push the price downwards.
3. Breakout from the chart pattern called Head and Shoulder:
is a chart pattern and it occurs at the end of the uptrend. The pattern gets valid after the candle close below the neckline. Currently, this neckline matching exactly with this consolidation box lower line and that’s why I said that we get 2in1 confirmation after the candle close below $3,940 (and if it occurs right away, then we get even 3in1, because of the is also involved with this candle).
On the 4H chart, EMA’s 8 and 21 have made a death cross which will be a confirmation after You have seen a breakout. So, almost everything starts to line up to make a throwback (movement down) after the breakouts. The short-term targets are those blue areas below the breakout area.
The price movements on the consolidation area are usually pretty unpredictable and that’s why I would like to give you a scenario/confirmation area.
First confirmation comes after the 4H(!) candle close above the $4k. So as has a neckline, so other patterns have necklines as well. There starts to form a chart pattern called Double Bottom:
…not a perfect one but it is readable, and it becomes valid after the neckline break which is exactly the round number $4,000. Here is also the 2in1 situation, firstly we get a breakout confirmation which triggers the chart pattern and secondly we get a break above the round number.
You have to watch also what the altcoins do, currently, they are all on the minus ‘side’ and if they start to climb above the daily zero points and makes a breakout upwards above the $4k level then it would be another confirmation from altcoins – the whole market gets pumped!
SUMMARY: Consolidation area is a risky and unexpectable trading area so, that’s why is necessary to wait for a breakout which will guide the price into the short-term direction.
Bearish scenario: A 4H candle close below $3,940 triggers 3 criteria, plus we have death cross.
Bullish scenario: A 4H candle close above the $4,000 triggers the chart pattern.
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*This information is not a recommendation to buy or sell. It is to be used for educational purposes only!
Published at Mon, 25 Mar 2019 14:03:21 +0000
