No, Bitcoin Value Is Not in a 2018-Like ‘Descending Triangle’ of Doom

No, Bitcoin Value Is Not in a 2018-Like ‘Descending Triangle’ of Doom

Bitcoin
September 12, 2019 by The Btc News
24
Twitter is bearish, abuzz with chatter of a descending triangle that’s forming on the Bitcoin (BTC) chart and with comparisons to the descending triangle that broke down in 2018 at $6,000.  Twitter is usually incorrect. Let’s first outline the descending triangle. A descending triangle is among the many most well-known classical “bearish” chart patterns utilized
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Twitter is bearish, abuzz with chatter of a descending triangle that’s forming on the Bitcoin (BTC) chart and with comparisons to the descending triangle that broke down in 2018 at $6,000. 

Twitter is usually incorrect. Let’s first outline the descending triangle.

A descending triangle is among the many most well-known classical “bearish” chart patterns utilized in technical evaluation. It’s created when worth kinds a descending pattern line with decrease highs, whereas a second horizontal pattern line with equal lows evolves. 

Strict chartists use candle wicks and require the touches to be alternating, with at the least 2 touches to 1 line and three touches to the opposite, as seen beneath in a downtrend.

Drawing

This sample can happen in each uptrends and downtrends, usually has receding quantity earlier than breakout (78% of the time), and is confirmed when worth closes above or beneath one of many pattern traces. These are the boring fundamentals.

An fascinating indisputable fact that few folks know — whereas that is considered as a particularly bearish sample, the statistics don’t agree. 

In line with Bulkowski (the undisputed authority on chart patterns), descending triangles break up 53% of the time

Additional, when the triangle happens in an uptrend, it’s more likely to break up 63% of the time. Even when worth is forming a descending triangle on the present Bitcoin worth chart, the percentages that it breaks down are solely 37%.

Does that sound bearish?

Is there a descending triangle on the present Bitcoin chart?

In our opinion, no. The thought is there, however the particular standards will not be met. The 2 touches on the horizontal assist (the second wick doesn’t even technically contact) don’t have a contact as much as the descending resistance between them.

BTC/USD chart

BTC/USD chart. Supply: Tradingview.com

We’ve got seen many merchants draw the underside line as seen beneath, in an effort to make the sample seem extra legitimate. They usually clarify this by saying that the underside is mostly an “space and never a line.” 

For strict chartists, that is unacceptable. Additional, even when the horizontal line is pressured, there is no such thing as a third contact on the descending resistance to substantiate the sample.

BTC/USD chart

BTC/USD chart. Supply: Tradingview.com

The distinction in lows (utilizing the wicks) is over 10% of the complete construction’s peak, which lends credence to the argument {that a} descending triangle doesn’t exist. Normally, merchants search for it to be not more than 6%-8%.

What’s the right sample?

There’s a confirmed descending channel (usually known as a “bull flag”) with three touches on the descending resistance, and two touches on the descending assist line. This sample existed earlier than the descending triangle was even a thought — there is no such thing as a motive to try to attract a brand new sample earlier than the earlier one is invalidated.

BTC/USD chart

BTC/USD chart. Supply: Tradingview.com

What concerning the notorious descending triangle at 6K?

Bitcoin worth famously fashioned an enormous descending triangle with assist round $6,000, which broke down in spectacular style en path to $3,200. 

Sadly, merchants are evaluating the 2 patterns and suggesting that as a result of the earlier resulted in additional bearish momentum, this one ought to end in worth heading down as nicely. Is that this the right technique to view it even when the present sample is seen as a descending triangle? 

In our opinion, no! The 2018 triangle did fulfill the technical standards of alternating touches. Nonetheless, the triangle didn’t begin on the high of the all-time excessive the place the downtrend started; it began on the drop to $5,873 in February. 

In different phrases, there was already a transparent and vital downtrend when the sample started. The descending triangle that printed at the moment was a continuation sample. And in that vein, if the present sample is considered as a descending triangle then merchants ought to count on the identical outcome — a continuation of the pattern, which implies that they need to expect the worth to rise, reasonably than drop, out of the sample.

Additional, merchants would count on the underside line of the triangle to behave as vital resistance on the primary retest. This was the explanation that crypto Twitter insisted that Bitcoin can be strongly rejected at a retest of $6,000 from the underside. We had been screaming the alternative and publicly opening extra lengthy positions. 

What occurred? As you may see within the pink circle, worth handed by means of $6,000 like a sizzling knife by means of butter — there was no provide to be discovered, which is what you’d count on after the breakdown of a descending triangle. 

You’ll be able to argue that BTC worth swung across the triangle apex thereby avoiding provide, however at that time, you’re having to stretch for validation. There may be one other rationalization for the consolidation, break and subsequent bull rush again up by means of what was believed to be vital resistance, however we are going to save that for subsequent time.

BTC/USD chart

BTC/USD chart. Supply: Tradingview.com 

Bitcoin worth did finally proceed down, which descending triangle maximalists used as clear proof that they had been right. As talked about earlier than, the worth was already in a transparent downtrend, which is probably going the explanation that worth dropped — easy pattern continuation after consolidation. 

Value reacting in a fashion you anticipate doesn’t essentially validate a chart sample.

A sample isn’t a sample till it’s confirmed

A descending triangle is nothing greater than a consolidation sample, and most frequently consolidation patterns end in a continuation of the pattern. However always remember, a sample isn’t a sample till it’s confirmed as one. 

This doesn’t occur till the requisite alternating touches of assist and resistance print and quantity performs out as required. Merchants can do themselves a favor by making an attempt to know why a sample exists (the underlying psychology that results in the sample formation), reasonably than simply taking what seems to be a sample at face worth and slapping that designation on it with out affirmation — after which buying and selling it. 

In doing so, they’re extra more likely to revenue from that sample. Opposite to widespread perception, technical evaluation is extra than simply the traces on the chart — it’s an understanding of the underlying causes which have fashioned these traces.

The views and opinions expressed listed below are solely these of the authors (@scottmelker and Christopher Inks) and don’t essentially mirror the views of Cointelegraph. Each funding and buying and selling transfer includes threat. It’s best to conduct your personal analysis when making a choice.





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