Following Bitcoin’s bounce back these last few days after some sustained selling, there’s plenty of failed breakdowns out there in the Crypto space right now.
Frequent readers of ours know just how much we love these setups:
In essence, when price undercuts its former lows, stop losses get hit, and longs throw in the towel. At the same time, bears heavily jump in and enter short.
Then as the market begins to rally back above those former lows, shorts are now underwater, and they’re forced to cover. While they’re buying back their positions to unwind the trade, longs see price on a tear higher and fold into buying back their old position. Momentum traders see these gains and jump on the bandwagon too, forcing even more shorts to cover.
Long story short, it creates a positive feedback loop that can propel price significantly higher.
It’s why we love this pattern so much around here.
Looking through our Chartbooks today, we couldn’t help but recognize a lot of these patterns in Crypto right now, and it’s not just Bitcoin.
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