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Market Watch by Fyookball: Price Is in a Tight Channel

BTC
is often a good macro indicator for the entire crypto market, so
this is a good place to start. Bitcoin (BTC) has recently
surpassed its all-time high price just shy of $20,000, so it’s a
unique time to zoom out and look at the weekly chart for the past
several years.

Market Watch by Fyookball: Price Is in a Tight Channel

The last several weeks have been a rocket ride, and we’re now
bumping up against the technical resistance level of $20,000.
Amidst the bullish sentiment fueled by corporate investors such as
MicroStrategy, this could appear as resistance that will soon
break. The leg up from $11,000 was particularly strong, and this
kind of move often has a second leg. So the market is looking quite
bullish indeed.

Nevertheless, bears will also see shorting the $20,000 level as a
trade. Typically, selling at resistance is a low probability (but
good risk/reward) trade, as this kind of trade usually involves a
tight stop. If the bulls fail to conquer the 21k handle, then price
may slump. Aggressive bears will set stops there, hoping to see a
sell off to $17,000 or more.

Zooming into the daily chart, price is in a tight channel.
We’re seeing the straight up price action on a more detailed
scale. You can see price consolidating recently as it encounters
the $20,000 resistance level.

Market Watch by Fyookball: Price Is in a Tight Channel

Runaway trends are always hard to trade since putting on a big
position after a big run-up in price is risky. One strategy is to
put on a small position as soon as you know the trend is in play.
You can then manage the trade and add on later at either higher or
lower prices, and more information is made available to you by the
market and other factors.

Steep trends are not very sustainable, and will have to correct at
some point. If you buy, it is better to buy closer to the lower
trendline of the channel. If there is an extreme overshoot to the
high side and the market prints a full bear candle reversing down,
it may be an opportune time to short the market, although this
should be considered an advanced trade, as shorting in a bull
market needs to be done very carefully.

Now let’s take a look at Bitcoin Cash. Since BCH is correlated to
BTC in dollar
terms, let’s look at the BCH:BTC chart.

Market Watch by Fyookball: Price Is in a Tight Channel

Obviously, the trend has been down for many months. But is the
ratio low enough now that we’ll see a bottom? Perhaps. There are
signs indicating a decent chance. The daily chart above shows a
steep channel that formed October through December, but is now
broken to the upside by some strong candles.

For such a long bear trend, we would expect at least another push
down and/or a retest of the recently broken channel. Price usually
can’t retest a broken trendline that’s too steep. Still, price
can’t seem to get near it now, and the candles are small.

The bears aren’t able to push the price down further so the ball
is now in the bull’s court. Will they push the ratio up again?
Things look poised for a possible reversal, but we have to assume
the overall bear trend is still in play until the bulls prove
otherwise.

This column was written by Jonald Fyookball

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with the use of or reliance on any information in this article.

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Market Watch by Fyookball: Price Is in a Tight Channel
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