The most recent market price action has been the end of a recovery rally starting on 12th April in Bitcoin. Bitcoin topped out only a few tens of dollars short of $10,000 USD and entered a month-long decline, which halted temporarily towards the end of last week. The evolution of price action since can be described as pattern evolution and taking direction at this bottom. On the larger scale, this two-month episode of rally and decline has constructed a large symmetrical triangle, visible clearly on the weekly charts.

Altcoins have followed the same route, reaching a peak in early May, and declining to current levels at the start of June. However, their performance has been varied in the last week. Bitcoin Cash and Ripple have seen great short-term recovery rallies, while Ethereum and especially Litecoin have been weak, with even a failure of head and shoulders neckline in Litecoin.

Given this background, let’s pick out the key features of the current charts and discuss what implications they have for trading strategy.

The Big Triangle in the Sky

The most significant pattern present is on the weekly Bitcoin chart. Here we can see a large, 18-week symmetrical triangle. What are the implications of this construction? First, a triangle gives no buy nor sell signal nor any strong indication of the direction in which price is heading until it is broken. Anything one might determine before the triangle is broken is only suggestive and rough.

However, when a triangle of this size breaks, it is expected that the size of the move will be on the same scale as the pattern. This is the most important indication that the triangle currently gives: whichever direction the market breaks, the signal will be clear and will provide a strong indication of further movement.

Regarding the projected direction of breakout, symmetrical triangles, unlike ascending or descending triangles, do not give an indication ahead of time as to which direction the break will take. Often, a symmetrical triangle will end in a continuation of the preceding move, in this case, a downward move from the December bull market top of 20,000USD.

Nonetheless, this is only a rough statistical rule and triangles appear both as reversal and continuation patterns. A recent example of a symmetrical triangle reversal can be seen on the 4 hour Bitcoin chart at the intermediate trend reversal from the end of March to mid-April. So, while the more common continuation nature of a triangle would suggest a bear market continuation here, this is not something on which to base decisions.

A Closer Look at Last Week

The last week of price action has been the evolution of congestion at the level of the support trendline of the triangle mentioned above. Many altcoins showed a complex head and shoulders type formation, which broke to the upside in most cases. However, the trading performance of this pattern varied between the different altcoins. Notably, Bitcoin did not show such a development, giving a different construction.

In terms of altcoins, we can use Ethereum as an example. A complex formation is a variation on the simple head and shoulders, but where we may see multiple heads or shoulders. In this case, we see that the left shoulder is a symmetrical triangle. (Yet again! These have been abundant in crypto charts lately.) A head and right shoulder then forms. The neckline is rather poorly defined and there is very little increase in volume on the breakout, indicating a weak or even invalid pattern. The rise does not extend far and then returns to the neckline, not penetrating it, but bouncing back up. It may now be forming a new top, defining a resistance trendline.

Not all altcoins showed such a disappointing development. Bitcoin Cash and Ripple both had better-defined necklines and their right shoulders were composed of triangles, making identification of breakout easier. Their advances climbed much higher to the next resistance levels — even a little further in the case of BCH.

Bitcoin has not shown a complex formation with a clear neckline. Instead, it appears to have entered a short-term trend channel, which was subsequently broken on the down side. Following this, we saw a throwback to the broken trend-line. This construction could be seen as a flag pattern on the daily scale or, alternatively, price action could develop a larger reversal or continuation pattern before making a profitable move. Should a flag complete, it could mean a downward break through the lower line of the large triangle on the weekly.

Links to charts:

BTC large triangle on the weekly – https://www.tradingview.com/x/gwPqHmWI/

Examples of symmetrical triangles in BTC, 4h – https://www.tradingview.com/x/KF0hc8iT/

Recent ETH price action, complex formation – https://www.tradingview.com/x/qkkufHfJ/

Recent BCH price action, complex formation – https://www.tradingview.com/x/wPCivtfA/

Recent BTC price action, break of short-term channel – https://www.tradingview.com/x/Tf7Dmwbt/