To illustrate this, I have extended the neckline out to the left, to catch the volatile trough that was formed on 1/17. You can see that, initially, BTC fell to a low that was deeper than the current left shoulder, and when it returned to the neckline resistance, it actually traded above that area and then reversed. Sure, the neckline was still being formed, but you can see that the price action relative to the overall pattern, produced a failure above the neckline, and a trough that was deeper than the left shoulder. Therefore, we may see some similar action here, in where another trough is formed, possibly even deeper than the trough formed by the right shoulder. Furthermore, we can see a history in the BTC chart, where patterns produce continuation formations before the real breakout. If you look at the all time high, I called the formation up there, and everyone was saying "that's not a formation, those don't work in crypto, it's been dragged on for too long' blah blah blah. You can see that a series of formations were formed from the all time high, and the original formation was never invalidated. Therefore, it's downside target always remained valid, and I never took it off of my chart. When BTC was above 13000, I was calling for a fall to the 5700 area. You can see that that call was miraculously accurate, when everyone was still calling for the moon. Part of the reason I knew that BTC would go there, was because of the series of formations that it was producing, and my understanding of the technical mechanics. The same rules apply here. We may get a pullback, but there is currently no reason to believe that the inverse pattern is invalidated.
That's why I always say, "WAIT FOR CONFIRMATION." When you see a breakout, wait for the surge in , wait for the close above the , wait for a retest of old resistance, to confirm it as new support. Those things didn't fully materialize in this recent breakout. One candle closed above the neckline, but there was no follow-through. It immediately reversed. Right now, it's anybody's guess as to how low BTC will retrace. I do have a suspicion that it could retest my green , but that's still a lot lower from here, and there are a couple key support levels in the way.
I want you to look at the pattern formed at the all time high again. You can see that after it was formed, BTC created a smaller mixed series of patterns before breaking down. We could see something similar here, where BTC forms a series of patterns, over the next month or so, before the upside breakout actually occurs.
For now, look to the 200 EMA for support, followed by the black down-sloping trendline, and then the green trendline support. A break below there would put a retest of the pink channel in play. A break back into the channel, would be a very negative development.
This has been your not-so-humble market wizard, droppin' knowledge like bombs in this place! Please follow, comment, like, and share on social media. Good luck trading everyone!
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
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