This analysis will be on the daily timeframe but remember folks, markets are fractal and what I am discussing here can be applied to any chart on any timeframe; let us begin.
First we are going to start with some good old hindsight bias. Below is a BTCUSD chart from 08/12/2020 to 20/05/2021.
Here we can see Bitcoin making a series of higher highs and highers lows. Each significant swing low becomes protected, meaning that until we have a candle that closes below the prior significant swing low, we must assume that the price action on this timeframe is remaining bullish.
On April 24th we have the candle that closes below the prior protected swing low. This is not a signal to go short. What this is, is an indiction to us that price action, in time, could be looking to change from bullish to bearish and we should begin to start looking for a place where price may want to retrace to, that offers us a good risk to reward entry point. For me, I like to look for price imbalances. You can see I have marked out the imbalance created by the wick low on April 17th and the wick high on April 19th. Where does price retrace back into – right into this area of imbalance in the market. Perfect hindsignt bias, I know. Let’s have a look at where I think BTCUSD is going.
Current BTCUSD chart
On the chart above we can see Bitcoin has made two substantial legs higher and it has put in a protected low at the $39,573 level. What this means is that technically speaking, Bitcoin could retrace down to 39,573 and as long as it does not close below that level the bullish structure on this larger daily timeframe would still hold.
I actually expect a rectracement down to $50,000, and here is why.
You can see from my chart above that smaller blue imbalance level marked right around the $50,000 level. There is an imbalance here that more likely than not needs to be filled. In addition to that daily imbalance, we also have confluence from a weekly imbalance which you can see below in orange. This weekly imbalance completely engulfs the daily imbalance at $50,000. So, now we have a daily and a weekly imbalance around that $50,000 level.
What is also really clear here is where the liquidity lies in the market currently that the composite man will want to run. I think we will see some more consolidation, the building of liquidity on both the top and bottom sides of the market. I think we will then see a run to the top side above the most recent all time high triggering all the buy stops and the shorts stop losses and then a drive down to around the $50,000 level and then another run to the upside to clear the liquidity made from the move down to around $50,000.