BTCUSD broke out of the monthly triangle. Triangle/ wedge is a powerful piece of technical analysis. It usually shows price converging which is normally followed by a breakout which could be to either side (The triangle is highlighted and the sides marked with yellow trendlines).
In this case, BTCUSD broke out to the upside which means we are bullish. There are a few critical areas that we need to make note of. It is easy for weak hands to think that the market will fall at the first sight of a bearish candle. We are now seeing a bearish candle after the bullish break and this will intimidate a lot of people and this would be a good time for you to get your “balls of steel”.
Before you panic, there are a few key areas to take into consideration. Before the market can be considered bearish on the monthly it must break two key support areas. The first support area would be the back of the trendline. The second, which is the most meaningful is the horizontal line we are seeing on the monthly chart above. This area is very significant and no one can deny. The horizontal line marks a very powerful zone. I have circled the times market has found support or resistance at this very same area. This area is by no means a fluke but a very powerful one.
As long as the price remains above this area we are still in the bullish trend. That is, as long as price remains above $8800 the bullish trend still holds.
On the weekly, we can see clearly the many different times the market has rejected this area marked by the horizontal yellow line. The market has found resistance and support over and over in this same area.
Let me draw your eyes to the area I have as my key support area (KEY SUPPORT AREA). Although we see price at this strong support and the single yellow line would seem as if it is the support but support in the market is not a single line but an entire zone. The support zone is from the horizontal yellow line down to the “KEY SUPPORT AREA” white line. The market moves in waves if the market is bullish the market will be making Higher Highs and Higher Lows and if it’s bearish it will be making Lower Lows and Lower Highs.
The market is not only bullish because it broke out of the triangle, or for others, break of the trendline. The main reason the market is bullish is that the market made a LOW then a HIGH then HIGHER LOW then a HIGHER HIGH which indicates a bullish trend (All marked on the chart with circles). My main support area is below the HIGHER LOW that was made and for the Bullish wave (trend) to stay true on the weekly the market must stay above that HIGHER LOW. It doesn’t matter if it breaks below the yellow line (support), as long as it remains above the HIGHER LOW (white line) the bullish trend will be intact because the HIGHER LOWS and HIGHER HIGHS still holds even if the market twerks in that area above $8800.
As we move to the lower timeframe we start to see other levels to be observed. The daily timeframe shows three (3) key levels and a bullish trendline, that’s just as important. Before the bullish trendline got breached to the downside, if we take a look at LEVEL 1 we can see price found support with two (2) clear rejections. It then broke through to the downside and found support at LEVEL 2, which if we look to the left is a very strong resistance area, which we also saw on higher timeframes. Price then went up and found resistance at LEVEL 1 which was previously support, then started to make its way down.
The KEY SUPPORT AREA is derived from the HIGHER LOW made by the bullish wave. Although price is approaching LEVEL 2, for the market to be bearish it has to go below the KEY SUPPORT AREA. So that’s two very strong support area that needs to be broken before we could possibly see some serious bearish move.
The support and resistance level comes from the timeframe above (daily) but price rejections can also be seen in this timeframe. Information can also be had from a smaller timeframe, although they don’t normally tell the overall picture they are still worth noting so to appreciate the different moves that may occur at the lower level.
A clear bullish trend was seen, denoted by the yellow wave structure. So we saw the market move from a LOW to a HIGH to a HIGHER LOW and then to a HIGHER HIGH. The bullish trend was cut short and now we are in a bearish trend denoted by the white wave structure. The market moved from a HIGH to a LOW then made a LOWER HIGH then a LOWER LOW. The bearish trend will remain intact unless price breaks above the previous high which would be where we have LOWER HIGH. If the market breaks below the white LOWER LOW then we will see the second wave of a bearish move which means further bearish moves.
BONUS SETUP SENT OUT ON SUNDAY
The setup above was given to my team. The market was at a critical point and we were looking for a break of the high or a break of the low. A break of that high would mean the bullish trend continues (Buy Stop) and if we got a break of the low we would sell. Using a Sell Stop that was a very easy setup to catch.