Incoming Opportunity for Bitcoin, The Bullish Divergence and More!— June 27th, 2021
Written on 9PM eastern time, June 27th 2021:
On June 24th, 2021, Elon Musk tweeted:
and shortly after we saw a massive (about 5000$) dip on the price of Bitcoin.
Noticed that a day before he posted, someone has borrowed 25,000 Bitcoins (Yes your heard me, not 25,000$ worth Bitcoins) to short the market.
In case you don’t understand what shorting is, please allow me to explain it to you. Let’s say I’m able to borrow 2 bitcoins from you and I’ll pay back tomorrow, so initially I will owe you 2 bitcoins. If I sell this 2 bitcoin at the price of 30K, I get 30K cash but still I have to pay back the coins I owe tomorrow. If the price of bitcoin goes down 5000$ in a day, I can buy back 2 coins with the price of 25K, and pay back coins I owe, I will earn extra 10K.
Let’s go back to the subject. We can clearly see from the picture that the price could not go anywhere below 30K now where the volume has decreased significantly indicating that retails are not selling. Eventually, a little buying power can cause significant growth of the price. And that brings to the subject I want to talk about today, bullish divergence. Let’s take a look back to a few days ago when the price dipped to 28K.
In the picture we can see that although the price is going down, MACD shows uptrend pattern along with reducing numbers of red candles in MACD. So when you see bullish divergence you can try to buy in at where you see the first green candle or the smallest red candle in MACD.
Ok now let’s again take a look at today’s chart.
Same trick, buy in when you see the bullish divergence at where you see the first green candle or where you think is the last and smallest red candle in MACD, and place your stop loss at the lowest point of the dip (as shown in the picture, the blue line). In this case, your wining/loss ratio is 3:1, why not?
Noticed that in my demonstration I’m using 1-hour chart. If you see this pattern in 4-hour chart or even daily chart, more significant growth you can expect. Again, this is more a possibility prediction than a definite equation to success. If FUD hits, all the patterns are invalidated.
Now, if you miss the bullish divergence, you have another shot — Box theory.
Usually, when you see the price drops/dips to a certain point, specifically where the buying power is reducing, you can expect the price falls into a box as shown in the picture above. You can draw a box that includes the lowest and highest point in a certain time period, and buy in when you see the price breaks out. By saying breaking, I mean you see relatively large volume along with the price growth. Again, it’s a probability game, not a definition.
However, in this case, I also want to bring up the triangle pattern which I saw in 5-min chart within the given box in the picture above.
When you are able to draw a descending triangle pattern, and see a break out with volume, you should realise it is the chance to buy in.
Now let’s zoom out to 4-hour chart.
We can clearly see a long green candle breaks out the descending trend and also a W pattern can be observed. This position is very important because as if it breaks through the previous high point as shown below,
you can expect a major growth on Bitcoin. However, nothing is really bullish below 42K as it was the major support during last bull run and it became a very strong resistance now. If the price fails to break out the high point in the circle as shown above, we might be looking at another triangle pattern (just guessing). But at the end of the day, we can still look for chances.
Remember, it is probability than definition. So don’t bet all your money against it and please always place stop loss if you are a daily trader (especially if you are using leverage).
