When looking at a chart, all to often you see calls for flags, triangles, , cups and handles, etc. Being able to draw one of these on a chart does not mean much, which is why they often fail leaving new traders stunned. One thing to understand that the breakout direction is more important than then the formation, and whether a pullback or throwback occurs increases or decreases the odds of a continuation. With this said, the context and underlying fundamentals and sentiment of the market is what creates these patterns. So these must be used in conjunction with the pattern itself or as statistics has shown, its a coin flip.
Looking at the context of the broader market, we have had a nice movement off an extreme low and have consolidated nicely between 7900 and 9000 or the and 0.382 extension of the previous bull movement. Theses are also interesting levels going back to November and December where 7900 went from resistance to support before the bull move to 11k after of which 9000 was the from the pullback where we bounced with a "V" formation pattern setting up the run to 16k. We have also formed an ascending flat top triangle which is a generally considered a consolidation pattern prior to a breakout either up or down, and withing this structure we are completing a rounded bottom along the . The 8290 level is the of the previous move between the 7900 and 9000 levels and we are consolidating nicely into the peak of the triangle. So what are we looking for as a possible trade?
A breakout of the 9000 level sets up nicely for the 9738-9840 levels which is the 0.618 extension of the previous move and the of the previous move. We could see a throwback so I will look to close out somewhere below the channel. If your a scalp of day trader this is probably the first setup I have seen in a while to trade BTC . However ascending triangles also break to the downside. A break to the downside I will be looking for a pullback around the 8290 level for a shorter term trade to 9740.
The long term market is still and we have only completed the 3rd or 4th wave of a longer term move. The current shorter term structure is forming nicely for a move and our previous targets from the last post are still valid. Sentiment is slowly changing and more and more I am hearing "should I buy here", and not "do yo think we can go lower". Sentiment drives markets in the end and clearly this is changing to the direction and the chart patterns are confirming this not leading it. I do not need to turn on the weather channel to see if its raining outside, I just need to walk outside.
Bottom Line: It is not the pattern that is important, but the overall trend structure and market sentiment that is creating the pattern that is. Understand the difference. Trading is not connecting the dots, it is more important to know which dots to connect to get a clear picture.