I've noticed many people drawing this descending wedge recently, so I feel it's a good opportunity to do some technical analysis education!
First of all, a descending wedge is usually a bullish structure, but it is not a reversal structure, which is different from the double top structure mentioned in the citation.
Based on the descending wedge, there are only two right-side entry points for trading, which are at the green arrow positions in the diagram:
1. When the upper edge of the descending wedge breaks and pulls back, if effective price action support appears on a smaller scale, one can enter a long position. However, this situation has a higher probability of being stopped out because the pullback after the breakout of the descending wedge usually targets short-term bullish liquidity.
2. After waiting for the price to pull back and establish effective support, when the price breaks the left-side high again, one can trade in the direction of the breakout with a stop loss below the previous pullback level. This is the decision point with the highest success rate.
Currently, the BTC daily structure is theoretically not a standard descending wedge, mainly because its lower edge is touched too infrequently. In some extreme cases, a new low with enhanced momentum can turn it into a descending channel, continuing the existing bearish trend.
Therefore, if you are optimistic about the subsequent daily rebound market, my suggestion is to either take a small position betting that it can ultimately break the upper edge of the wedge here, or wait until the upper edge confirms the breakout and the pullback is effective before fully entering the position.
According to the general rebound target of the descending wedge, 0.618, if this daily structure can develop, the rebound target is between 97k and 98k. However, in some cases, the rebound target of the descending wedge could be the previous high.
Generally, I tend to only consider the area around 0.618, so even if I enter a position at the 87000 pullback level, it can still bring around a 10,000 USD increase in price.
As usual, let me list two cases: one successful case and one failure case:
Successful case:
From September to October 2021, after experiencing a rebound, BTC began to form a daily level descending wedge. After breaking the upper edge of the wedge, it directly reached the 0.618 rebound target.
As for the rise after reaching 0.618, it has little to do with this pattern; it depends on the sustainability of demand and the macro background. Simply put, the descending wedge is like a driver who only cares about delivering the price to the 0.618 level of the previous high with over a 50% probability, and then doesn't care about anything else...
Failure case:
From April to May 2022, after a long period of large range fluctuations, BTC formed a range breakout (red line in the diagram), but this breakout later turned out to be a false breakout, and then began to form a descending wedge that lasted for a month.
At the end of the wedge convergence, the price never managed to stay above the upper edge of the wedge or effectively break through it, ultimately choosing to break downwards, officially starting the bear market of 2022.
This is why I suggest avoiding subjective biases before seeing a wedge breakout, thinking that any descending wedge will definitely rebound.
Do not assume the market will behave in a certain way, but wait for the market to tell you how it wants to move!
Finally, let me add a case of a small wedge turning into a large wedge, with a breakout pullback and subsequent breakout:
At the beginning of 2019, after a sharp drop at the cycle bottom, BTC formed a descending wedge structure over 100 days. After breaking the small wedge (dashed line), it strongly broke through the large wedge again, and a week later it retested the lower edge of the wedge, showing effective price action with a long lower shadow on the daily line.
This is the first potential long position. Later, when the high point formed after the first breakthrough of the large wedge was broken again, BTC produced a miraculous large bullish candle, thus starting a mini bull market.
The green arrows in the diagram are the two trading decision points I mentioned initially. You will find that the former looks more secure but carries the risk of a false breakout, while the latter almost guarantees a price increase once you buy in...
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