Disclaimer: The ideas presented in this article should not be taken for investment advice, and are simply the views and opinions of the authors.
This is the third weekly collaboration between Eric Crown & Mango Research. Eric is, by far, one of the few technical traders in the space that really knows what he’s doing. He has over 10 years of experience trading traditional markets and market-making for equities.
What we like about Eric the most is that he doesn’t simply trade technicals – he trades the crowd psychology & behaviour derived from the technicals. We’re excited about this collaboration and will hope you enjoy & learn as much as I have from Eric.
A lethargic week of price action culminated with a rollercoaster weekend with an explosive break to the downside. Forecasts from the previous reports are playing out well. Overall trend still remains bearish. Multiple signs point to a revisit of the weekly 200MA. In fact, price appears to be dropping even as we conclude this report.
While we do believe that Bitcoin will eventually make new lows, we believe that we are likely to encounter strong support at the $3.2k region. Although, the break of the monthly 55EMA leads us to believe that BTC may break the $3.2K level on its current drive down.
Bloody Monday! And Rejected EMAs!
Another roller coaster weekend. But this time, we followed up with a Bloody Monday.
The entirety of the week comprised of “wicks” shooting to either side of the narrow trading range. This is a clear indication of “liquidity hunts”. Institutional money looking to distribute (and/or accumulate) in target price-areas where retail investors are likely to place their orders. Once they tap into that liquidity, the price promptly returns to the range. We witnessed that all week and cautioned against trading the lower time frames.
If price action in the past week frustrated traders, the weekend was just as bad . Bitcoin bursted out of its trading range early in the day and shot up to $3660 to test the 21 EMA. Once again, sellers promptly stepped in and the move was sold into. Krown managed to catch the move live on video this Saturday. He was quick to place a short himself – a rather exciting video after week of lethargic price action!
The following events contributed to Krown’s conviction in the short.
Rejection of the daily 21 EMA
Rejection of the daily 10 SMA
Rejection of the weekly 10 SMA.
Furthermore, Bitcoin is still playing out the the larger symmetrical triangle that we’ve been discussing. Taking all of this into consideration, it’s no surprise that Monday started off with blood.
All signs still point to (at least) $3250
We’ve been saying it for almost a month now. All signs point to the $3250 area. Nothing has changed. There has been far too much confluence to suggest otherwise, namely:
The Symmetrical Triangle
Double-Top Murder Formation
Weekly 200 SMA
The Symmetrical Triangle
As depicted in the previous reports, BTC was forming a Symmetrical Triangle for weeks. It finally broke down at the $3850 region. While price action remains below that level, the measured move for this formation points to the $3250 region.
The Double Top
Then we had the Double-Top “M for Murder” formation on the 3-Day. The break of the neckline of this formation occurred at the $3700 region. It’s measured move pointed to the $3250 region as well. Considering this is a double-top formation on a higher time frame, we had a high degree of confidence in it playing out (and so far it is).
The 200 MA
Finally, we have the 200 MA that is sitting on the $3250 region as well – confluencing with both measured moves. The 200 MA is the mammoth of all MAs – especially on the weekly time frame. Almost all eyes are on this moving average. And the more eyes you have on a support/resistance line, the stronger it is likely to be. Bitcoin has been ranging between this 200 SMA and the 200 EMA. A break of either one of these will likely lead to a bigger move.
We’ve tested the 200 EMA a couple of times already – and it’s proven itself as strong resistance. And now, it looks like Bitcoin wants to test the support at 200 SMA another time. Will it hold?
Note: The 200MA has creeped up since the last test in December where it was sitting at the $3100 level. As things stand, the 200MA is currently sitting at $3298 (Bitstamp).
Lows in? Nope – Not yet.
Price may very well bounce of the 200 SMA. However, we strongly believe that Bitcoin is eventually going to break through this level and make new lows. We typically like to see at least a few flags turn green to indicate a possible low. Some of these flags are:
- High Volume Buying
- Volatility Index
- NVT Signal
None of these signals are flashing on – which makes us lean to newer lows. Our eyes are on some key levels of support:
- $2450 zone
- $1900 zone
- $1150 zone
Of course, these need to happen one at a time. When will this happen? Well, time-analysis can be tricky. These things can take time to play out. That being said there's a counterpoint that may indicate a more immediate break of the level: The Monthly 55 EMA.
55 EMA Monthly: An S&R Flip?
As the month draws to a close, we are approaching a crucial decision point on the charts. Over the past month we’ve been keeping a close eye on the monthly 55 EMA. As mentioned in the previous reports – higher time frames tend to hold the strongest significance. Moving averages, patterns and horizontals have a higher degree of playing out on higher time frames.
Bitcoin has never closed under the Monthly 55 EMA in its history. That being said – we must emphasize that Bitcoin is still relatively new. It hasn’t had enough time (market cycles) to test its monthly 55 EMA with conviction. This market cycle, however, has given Bitcoin ample of time and opportunity – and it’s not looking good.
55 EMA on the monthly has seemed to have turned from support to resistance. This is an extremely bearish sign. The monthly 55 EMA has successfully held as support on all prior monthly closes. However, as we inch towards the end of this month of January, the monthly 55 EMA seems to have given way.
Support has turned into resistance (S&R Flip) as January struggles to break past the 55 EMA sitting at $3670 level. This confluenced perfectly with the rejection of Bitcoin’s breakout this weekend
We still have three days left for Monthly candle close. But as things stand, it likely that we are going to close underneath the 55 EMA. An official close below the 55 EMA will make the larger picture look grim.
However, anything is possible in Bitcoin land. A dramatic move to the upside should not be discounted. A lot can happen in three days.
Ethereum: Leading The Market Up ...And Back Down!
Ethereum’s news driven rally back in December 2018 took the entire market up with it. However, we cautioned that it is very likely that it takes the entire market down with it as well. It seems that the market is playing out just as we predicted. This was highly anticipated since it is class event-driven market-behaviour:
- Event is announced
- Market rallies leading up to the event
- Market dumps closer to the event
Interestingly enough the event that was supposed to take place – never even happened. Constantinople was delayed and pushed back to the last week of February. Could we see the entire sequence of events repeat? Afterall, the initial rally seemed to have been a carbon copy of the BCH fork rally. Let’s see how things pan out..
That being said, Ethereum was forming the perfect Head & Shoulders pattern. Erik Crown stated that it had all the right characteristics for the pattern:
- Correct shape
- Correct Volume characteristics
- Correct Price Action characteristics.
- Well defined neckline.
However, the formation began to show some hesitation & doubt when the right shoulder got extended far too much. It was followed up with a rejection of the neckline to the upside.
But the distributive price action morphed the formation into a smaller descending triangle – which Eric discussed extensively on his daily streams. The measured move pointed to approx. $99. This seems to be playing out as we type this (Ethereum is currently sitting at $103.15)
Weekly Bitcoin Price Prediction: Summary
Overall trend remains bearish. Multiple signs point to a revisit of the weekly 200MA. In fact, price appears to be dropping even as we conclude this report. While we do believe that Bitcoin will eventually make new lows, we believe that we are likely to encounter strong support at the $3.2k region. Although, the break of the monthly 55EMA leads us to believe that BTC may break the $3.2K level on its current drive down.
Buckle Up! Its looking bumpy out there...
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