The downtrend of Bitcoin (BTC) started in November 2021 as an up thrust (e.g. false breakout) followed by a marking down until a Wyckoff change of character (this concept is applicable in Gold and crude oil as explained in the video) showed up in late January 2022. The change of character was the biggest up wave, broke out from the down channel, which stopped the downtrend into a trading range.
Bitcoin’s Wyckoff Accumulation Pattern Explained
Within the trading range between 33000-45500, the pullbacks of Bitcoin in February and March 2022 were accompanied by increasing of supply. Despite the excessive supply, Bitcoin formed a higher low suggested supply absorption according to Wyckoff’s law – efforts vs results, where increasing of supply (effort) fails to generate a meaningful downward result. Refer to the chart below:
It was worth to note that the test of the reaction in March formed a slightly higher low with decreasing of supply, which was considered as a successful test. A rally could be anticipated after the test with decreasing of supply.
The rally of Bitcoin started on 14 March 2022 broke above the resistance level 45530 followed by a backup action (BU) testing the axis line (unfolding now) where the previous resistance-turned-support. The rally could be classified as a sign of strength rally (SOS) when the backup action (BU) can commit above 44000, which was where the breakout initiated.
Since the backup action is still on-going, it is essential to considered the bullish case when the Wyckoff accumulation pattern is completed for Bitcoin and also the failure case.
Should Bitcoin break above 48000, it is likely to test the upper target near 54000, which is the level where the breakdown happened on 4 December 2021.
Although the tell-tale signs above point to a bullish bias for Bitcoin, it is essential to consider how the accumulation pattern will be violated. In order to maintain the bullish accumulation pattern, Bitcoin is to commit above 44000. Should Bitcoin break below this support level at 44000 with increasing supply followed by inability to rally back above, Bitcoin could test the immediate support level at 42500 followed by 38000.
Should a failure happen, the characteristics of the price action such as the price spread, velocity together with the volume are to be analysed using Wyckoff trading strategy as discussed in the video in order to derive the direction bias of Bitcoin.
4 Outperforming Bitcoin And Crypto Stocks For Swing Trading
Instead of trading or investing in Bitcoin, there are many Bitcoin and Crypto related stocks suitable for swing trading while taking advantage of the strength in Bitcoin. Refer to the chart of Silvergate Capital (SI), MicroStrategy (MSTR), Riot BlockChain (RIOT), Marathon Digital Holdings (MARA) below:
The trend for these 4 stocks is very similar to Bitcoin as they track the performance of Bitcoin closely. SI outperforms the rest as the current backup action is still a lot higher above the axis line (resistance-turned-support) followed by MSTR and RIOT, which are currently testing the axis line. MARA failed to break above the resistance, which is considered a laggard among the 4 stocks.
When the Wyckoff accumulation pattern for Bitcoin is completed, these 4 Bitcoin-related stocks are expected to start the markup phase to test higher price targets. Visit TradePrecise.com to get more stock market insights in email for free.