Jonathan Morgan
Independent Analyst
- Bitcoin price develops bear-trap on its Point and Figure chart.
- A Christmas rally of nearly 50% is likely.
- Downside pressure remains and could be devastating if triggered.
Bitcoin price has developed the necessary conditions for a Point and Figure chart pattern known as a Bear Trap. However, it has also developed conditions favorable for a Bearish Catapult setup.
Bitcoin price poised for a 50% rally to target $75,800
Bitcoin price action on its $1,000/3-box Reversal Point and Figure chart has developed two patterns, one bearish and one bullish. Both represent trades that have high positive expectancy rates. But one trade has significantly more profit potential than the other.
On the long side of the market, there is a theoretical long opportunity for Bitcoin price with a buy stop order at $51,000, a stop loss at $46,000, and a profit target at $75,800. The profit target is the 78.6% Fibonacci expansion. This trade represents a 4.96:1 reward for the risk. A three-box trailing stop would help protect any implied profits made post entry.
BTC/USD $1,000/3-box Reversal Point and Figure Chart
The theoretical long trade setup is invalidated if the short entry below is triggered before the long entry is met.
On the market's short side, there is a hypothetical sell opportunity for Bitcoin price with a sell stop @ $45,000, a stop loss at $49,000, and a profit target at $35,000. The profit target is derived from the Vertical Profit Target Method in Point and Figure Analysis. Therefore, this trade represents only a 2.5:1 reward for the risk.
BTC/USD $1,000/3-box Reversal Point and Figure Chart
However, while the risk/reward ratio is smaller, the Bearish Catapult setup has a higher probability of success than the Bear Trap pattern on the long idea.
The hypothetical short setup is invalidated if the long idea is triggered.
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