Bitcoin update 05/06/2021

The bitcoin chart looks bearish, very bearish. The recent fall was initiated by the break of the head and shoulders pattern neckline at around $50000 which led to an instant fall down to the target at $30000. Unfortunately for the bitcoin bulls, this doesn't look like the end of trouble since the head and shoulders pattern, mentioned above, looks like a part of a more complex wider head and shoulders pattern that might be in play. If the price rallies now to sell the 16-20 index and fails at $45000-$48000 level and turns around it will complete a mega bearish complex head and shoulder pattern. If then this pattern is broken to the downside the target is $20000 based on the old trend line levels but if we calculate the target based on the H&S amplitude, as we usually do, the target is sub $10000!! Be aware of deploying your capital to this sector, I wouldn't be surprised to see Bitcoin at $20000 and probably less by the end of July 2021. (click to expand)

I've been actively following the crypto market since late last year and have 1% of my net worth invested in it, mostly in ETH. There is a lot to learn and there is this narrative, pushed mainly by the crypto community, that the bitcoin is the replacement for gold and that it has taken away a good part of the gold market and that it will continue to do that. While I can see a lot of similarities between the gold and the bitcoin in regard to their properties as the sound money I haven't seen, so far, that in the market place that plays out because they do not behave in a similar way. While the gold is behaving like a safe heaven asset (risk off) and correlates mostly to the real yields and the inflation expectations the bitcoin behaves like a pure tech stock (therefore a growth asset, risk on), completely disconnected from the behavior of the bond market. To illustrate this I present here the chart of Tesla and Apple. Their charts are in the similarly bad configuration as the bitcoin chart; nothing even remotely correlated to the Treasury yields or the gold chart. 

TSLA - Tesla

The same as Bitcoin the Tesla price sold its long-lasting bull market and is now officially in the bearish configuration. The price is slowly being squeezed towards the apex of the contracting triangle and if broken to the downside the target is way down at $275 (from the current $599). See how the long term support is slowly being broken to the downside and how the 16-20 resistance is hovering above the current price threatening to push the price in the downside direction. To make things worst everything is happening under the 50 and 200 days MAV and as time is passing by the pressure to the downside will just increase. I give this chart an 80% chance to break down and when it does hold your hat. 

 

AAPL - Apple

AAPL chart is not as bad as the Bitcoin or Tesla but it is in a bearish constellation. The immediate target for the correction is the 218-222 index but the ultimate target is somewhere around $80-85. To turn things around and go on another bull run it needs to overcome the 16, 35 and 92 SKI resistance respectively and then the previous all-time high, pretty unlikely in my opinion.