250416 - Bitcoin Market Analysis
Yesterday I mentioned that if Bitcoin fails to break through 86100, it may retrace to the range of 82000~83500.
We can see that Bitcoin today, after a false break of 86100, retraced to a low of 83100.
Some friends may have thought that when Bitcoin spiked up to 86100, it was a "breakthrough," a strong signal, and eagerly jumped in to buy. As a result, the newly entered long positions were quickly trapped by a rapid drop.
This is actually a typical "false breakout" trap, which is a common mistake made by many retail investors.
So today I want to emphasize a key point: what is a true breakthrough resistance level?
A true breakout not only involves a price that momentarily spikes past the resistance level, but it also needs to meet the following criteria:
1. Volume breakout: A true breakout is usually accompanied by a significant increase in trading volume. If there is no increase in volume, it is mostly a trap for buyers.
2. Effectively closing above the resistance level: In my view, after a price breakout, it should at least close above that level with more than two one-hour candlesticks.
3. Retracement to confirm support: The most robust breakout occurs when the price breaks through resistance and then successfully retraces to the original resistance (which becomes support) and holds steady; this indicates a true breakout 80% to 90% of the time. (As shown in Figure 2)
So when you are making breakout trades, remember the three principles above, and your success rate can increase significantly!
Returning to today's market analysis, the direction today is actually uncertain, still consolidating in the support and resistance range of 82800~86100, so there’s not much to say. We should wait for the market to break down or break through, then we can make higher probability trades.
In unclear market conditions, staying out of the market is the best choice~