BTC tumbled sharply earlier today, coming within 400 of the 42,500 target we discussed on Aug 25 [see More of the Same]:
BTC reversed just short of its .618 Fib. Although the cloud remains bullish and it’s above all of its SMAs, it feels tenuous to me. I think we get a cloud backtest here, ideally at the 42,500 level.
It rallied from its lows to close above its SMA200, which is about the only bright spot on the charts.
Will it hold?
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Quick note: BTC backtested the top of the broken pink channel as detailed in our Jan 7 post [see: Jan 7 Update on BTC.]
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It seems like just yesterday BTC reached our last upside target range at 29,890-30,108. Actually, it was Monday [see: Jan 4 Update on Bitcoin.]
If it can hold these Fibs, the next major Fib target to the upside is the blue 2.24 and red 3.618 at 40,180-40,138.
Go figure.
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Almost 8 months ago I posted our first outlook on BTC [see: FOMC Embraces MMT.] We noted at the time that the FOMC was “officially in the short-squeeze business” after ES came within 19 points (trading was halted there) of our 2155 target and the Dow was set to test the Nov 8, 2016 (election day) lows.
This was the perfect time to assess what unleashing massive amounts of liquidity might do to crypto. We noted at the time that BTC should bounce from its triangle bottom (on the arithmetic chart) and return to test the top trend line at around 9,925.
We also noted that BTC had rebounded back above a TL on its log chart – an encouraging sign that supported the fundamental outlook. 
We left off with the note:
If you believe that BTC will necessarily rise (as gold will) as QE explodes, the charts support a continuing bounce. If you believe the FOMC will do whatever it takes to support the USD and crush surrogates such as BTC and GC, then keep an eye on that TL (5,000ish) as a fairly clear stop level.
As it turned out, BTC did return to the triangle top where, as we noted in our May 28 Update on Bitcoin that it had an important decision to make. Having reached 10,074, it had held an important trend line on its arith chart…
…but had failed to break out above a fan line on its log chart.
Our outlook at this point was that price action should determine the next move.
Is BTC a buy here on a potential breakout? Maybe. But, given the fact that it’s barely off its April highs, cautious types might want to wait for an actual breakout. If it occurs, there would be a small opportunity loss from not getting in here. But better to give up a few percent than lock in a trade with a lot more downside.
The alternative for more nimble types: go long but watch that rising TL from Mar 16 on the arith chart like a hawk. If BTC drops below it, run for the hills.
It took over three weeks, but BTC eventually broke out and, in the process, completed an IH&S pattern we’ve been watching and, just this morning, tagged the pattern’s 17,150 target well ahead of our target date in mid-December.
After exploding 2.65X since Mar 23, what’s next?
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I’ve only posted about BTC once before, back on Mar 23 in response to a member request [see: FOMC Embraces MMT.] The Dow was about to test its 2016 election day lows and, not coincidentally, the Fed had just unleashed QEinfinity.
The post went as follows:
Two major chart patterns jump out at me: first, the obvious triangle pattern on the weekly arithmetic chart (it isn’t there on the log chart) suggests BTC should bounce from here and return to the top trend line (which failed, BTW, to hold a recent tiny breakout.) It currently stands around 9,925.
Second, the daily log chart shows a TL was broken last week but BTC has since rebounded back above it. For those wondering, the retracement of the rise from the Dec 2018 lows to the Jun 2019 highs reached about 81%. Had the TL held, we’d be looking at a Fibonacci 78%.
If you believe that BTC will necessarily rise (as gold will) as QE explodes, the charts support a continuing bounce. If you believe the FOMC will do whatever it takes to support the USD and crush surrogates such as BTC and GC, then keep an eye on that TL (5,000ish) as a fairly clear stop level.
Having spent a few hours studying Bitcoin, I promptly forgot about it. I don’t really follow it, and believe it’s at least as heavily manipulated as everything else. Probably more. But, thanks to member John K., I was encouraged to take another look.
As it turned out, BTC did continue its bounce and went on to test the top trend line, reaching 9917.25 on May 8. It was an impressive 100% move from the March lows.
Of course, now it’s back at overhead resistance – the same trend line from December 2017 which halted the 2017 and 2019 rallies.
We’ll take a look at the potential for a reversal or a breakout.
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