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Ahoy traders!

The last couple of days have shown us a lot of indecision in form of choppiness on the daily candles. Indicators such as MACD & RSI are also supporting the indecisiveness with their neutral position.
This reveals the underneath sentiment for the traders and investors (although a majority are bullish). When the market is showing a great amount of indecision, disbelief or neutrality, it often leads to high volatility.

Bitcoin has finalized the last shoulder of the inverse head & shoulders pattern and it’s facing decision time which way the market wants to move.
The indecision is reflected on this pattern as you may notice on the volume that it has not been able to follow up to the neckline.


Why volume is important?

There are two major confirmations to look for when a market is starting from an inverse head & shoulders pattern.
1) There should be a large volume expansion from the bottom of the head towards the neckline (in this case it was correct)
2) Volume should start expanding from the bottom of the right shoulder towards the neckline (hasn’t been able to do so).
These are just two main components to look for that are giving validity and reliability for this pattern.
Without volume, it has a higher chance of failure.

Here is a prime example of how the volume should look on the last shoulder:

Even if the volume was not able to expand towards the neckline, then it’s not the end of the game and that’s why it’s important to look how it reacts when the price starts breaking out of the neckline and see if the volume starts expanding. If it does then this gives plenty of credibility for further upward movement.

The next major resistance levels can be found at $4,098 and $4,311. Taking down these resistance levels it should have no problem reaching the MA100 and the pattern target.

Fractal (compared to July 2018)
What is interesting here is that the market is showing a lot of similarities than what we saw back in the July 2018. This is called fractal where the current price movement mimics something that we have seen in the past. They are giving possible hints for how the market is going to move and are never exactly alike.

Similarities:
IH&S pattern
Bounce off from 0.618 Fibonacci level
Break out above of MA50

Things to watch for are a breakout above of the neckline + middle line of the descending channel (red) and increased volume.

Currently, the sentiment is quite euphoric and most of the people are bullish. It’s a good thing to remember that if caught by peer pressure it can lead to poor decision making.

Conclusion:

It’s good to know that the structure of the pattern varies on different exchanges but volume remains very similar. Volume should not be neglected or undervalued because it’s one of the key tools to confirm trends + breakouts.  Although the volume wasn’t able to follow up towards the neckline, it doesn’t mean the game is over but it’s more important now to follow how it reacts when the price starts to break out from the neckline. Expanding is a good sign and gives credibility for further upward movement. Without expansion on volume, it has a higher chance to fail.

Another thing:
Getting caught by peer pressure leads to poor decision making and can steer away from the focus zone that is required for situations like this.
There shouldn’t be a rush to enter but instead to monitor and see if which way the market wants to move. Like mentioned at the beginning of this text, indecision, disbelief, and neutrality are likely to lead high volatility which means that inexperienced people will lose money during times like this.

Trading is all about risk management and following the rules that each person has set for himself.

DISCLAIMER:

Please be aware this is not financial advice. You are responsible for your trading and investing decisions. It is highly recommended to do your own research before investing in anything.

My list of trading tutorials:

Lesson 1 – Beginner’s Guide: How to use Moving Averages to Day Trade?

Lesson 2 – How to trade a selling climax with cryptocurrency?

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