BTC Between the Lines

What does range look like?

So what does Sideways or Range look like?  Generally speaking, when an asset maintains a level of resistance and a level of support while trading within those bounds can be considered Range or Sideways action.  Bitcoin at this moment is testing the support levels of its current range.

Range is important because it means the asset is no longer cleary trending up nor is it clearly trending down.  When as asset is in this phase, it is generally considered to be consolidating.  This is when both the buyers and the sellers essentially agree on a value.

This consolidation can go on for days, weeks or months and it is a good opportunity for traders to either exit or enter an asset.  Sideways does not mean Up or Down but it’s placement in the chart can help direct speculators in one direction or the other.  

The speculation starts to happen once one side breaks.  Either the upper resistance breaks and traders will look for an uptrend to follow or the support breaks and traders will look for a downtrend to follow.  These can happen in the middle of a larger trend or at the very top or very bottom of a trend as well.

BTC on the Daily

Here we can see Bitcoin on the Daily Chart.  We have just enough data to call this the very beginning of a potential range.  We can say that because both the top and the bottom have been tested at least twice.  This adds confidence that Support and Resistance are equally strong.

A majority of the trading happens in the middle of the Top and the Bottom.  The Orange indicates the range while the red box indicates the high side resistance where we can see some outliers and some wicks but no really good candles closing in that zone.  The same can be said for the green area which is the low side support area.  

Ideally, we would like to see double or even triple the amount of candles in a daily range but this could potentially be the identification of a range early on.

Sideways Range Levels

Bitcoin is heavily testing the Support area.  Too much time in one area will lead to a break in that level.  With all of the selling in the last three days, the Support gets weaker and weaker and with the right push – it will break.

What we can see that happens often is what are called Fakeouts.  A Fakeout is when the price does indeed break a Support or Resistance level but is unable to hold above or below that level.  This forces the asset to spring back into range and start all over again.  

For now we have these areas to consider:

Range High Resistance Area – $50,053 – $50,819

Low Side Support Area – $46,852 – $46,131

This makes the meat of the range: $46,852 – $50,053

Some traders will use these levels to always Buy the Support area and always sell the Resistance area until either a Breakout or a Breakdown happens.  This type of trading can be very profitable but you need to be aware of your stops and whether they exceed you max high or low side trading areas.

We can also see that yesterday was the first candle close below the support area.  This could indicate that there is more downside to follow.

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