The Forex Chronicles

Descending Triangle on Bitcoin – September 2019

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Bitcoin Price Action

Bitcoin has had a pretty crazy ride over the last few years. After surging higher to around $20,000, the price subsequently dropped all the way back to around $3150, and is now sitting somewhere in the middle of these two extremes at around $10,200.

If you look at the daily price chart of this particular cryptocurrency, you can see that there is a real air of uncertainty surrounding it right now:

Bitcoin Descending Triangle - September 2019

You can see from the trendlines marking the high and the low points that the price has been trading in a descending triangle in recent months, which basically means that it has been trading in an ever decreasing trading range.

The significance of this is that when the price of Bitcoin eventually breaks out of this descending triangle, which it has to do at some point, there is likely to be a strong breakout either upwards or downwards.

Breakout Price Targets

If there is to be an upward breakout, the price of Bitcoin is going to need to move strongly above $10,600, and close decisively above the upper trendline.

Similarly, if there is to be a downward breakout, the price is probably going to need to close below $9500 based on the current trendline level.

With regards to price targets, it is almost impossible to predict how far the price of Bitcoin could go, regardless of which direction the breakout is.

You would think that $8000 would be easily within range if there is a downward breakout, while the price could easily test the previous highs of 2019, and possibly push on even further to $15,000 and beyond if there is an upward breakout.

Final Thoughts

The point is that although Bitcoin seems to be fairly dead right now in terms of daily price movements, it could soon kick into life if the price breaks out of this descending triangle.

You can be sure that many traders and analysts are aware of this triangle and are eagerly anticipating a possible breakout, and so when there is a big price move in either direction, there is likely to be a lot of momentum behind any breakout.

I myself am not really a trader of cryptocurrencies, but I just thought I would alert people to this particular trading pattern because these descending triangle breakouts can be very profitable when they occur.

Please remember that Bitcoin and other cryptocurrencies are highly speculative instruments, and it is possible to lose all of your capital.

AUD/USD Analysis August 2019 – Long-Term Breakout Confirmed

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Previous Trading Range

If you read my previous blog post that I wrote about the AUD/USD pair last month, you will know that I talked about a potential long-term breakout that could be about to take place on this particular currency pair. Here is the original price chart:

AUDUSD Long Term Downward Trend 2019

The price had been trading within a clearly defined trading range for the whole of 2019, and so it seemed like it was only a matter of time before the price broke strongly upwards or downwards out of this range.

July / August Breakout

I actually thought that we would eventually see an upward breakout, but as you can see from the daily price chart below, the price actually broke lower, and more importantly, closed below the lower trendline on the last month of July.

AUDUSD Breakout July August 2019

Subsequently, the momentum of this breakout helped to drive the price lower into August, hitting a low of around 0.6677 on 7 August before bouncing back.

I said in my previous blog post that I think the price may find support at the previous low, which was caused by the flash crash back in January, and this proved to be correct because although the price did go slightly lower than this on an intraday basis on 7 August, it soon found strong support at this level and bounced back towards 0.68.

Future Direction

After finding support at the previous low, it is hard to argue that the price of the AUD/USD is likely to continue falling much more.

This is a long established downward trend, but after the previous breakout and the subsequent rebound, it is starting to look like it is close to the bottom now.

Therefore I would say that in the near future at least, the price is likely to move back towards its 200-day moving average, which is currently just above the 0.70 level, and back into its previous trading range.

After that, the previous downward trend could prevail and the price could easily fall again, or we could finally see the start of a new upward trend, but for that to happen we really need to see the price close strongly above the 200-day exponential moving average.

If the short-term moving averages cross above this indicator as well, then there could well be a longer sustained upward move in the future.

Final Thoughts

The point I wanted to make is that it can be very profitable to wait for these breakouts to occur, particularly when a pair has been trading in a clearly defined trend for many months, as was the case here.

In this instance you could have banked up to 172 points if you had entered a short position at the close of the breakout candle and closed at the lowest point on 7 August.

Of course the hard part is deciding when to close because it is virtually impossible to get out at just the right time, but there were still plenty of opportunities to make money because you could have set your price target at 50, 100 or 150 points, for instance, which were all realistic targets, or closed incrementally as the price continued to fall.

These breakouts require a lot of patience because the price may be stuck in a trading range for many months, but when they occur, they can be very rewarding.

AUD/USD Analysis July 2019 – Poised For Long-Term Breakout

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Previous Price Action

The AUD/USD pair has been very interesting to watch in the last few weeks because it is getting closer and closer to a significant breakout all the time.

If you look at the daily chart of the AUD/USD pair below, you can see that it has been stuck in a long-term downward trend for many months now, and recently bounced back downwards after hitting the upper trendline, demonstrating the strength and significance of this trend.

AUDUSD Long Term Downward Trend 2019

The lower trendline of this trend is not so strong because the first low was caused by a flash crash and quickly recovered, but many long-term traders will still consider this as a low point, and will plot the lower trendline accordingly, as shown above.

Future Breakout

You will notice that these trendlines are converging more and more every day, and because the price is still refusing to break upwards or downwards out of these support and resistance levels, the breakout is likely to be quite a big one when it does finally occur.

Indeed the longer the price stays within the confines of a long-term trend, the stronger the breakout tends to be in general.

Ideally I think many traders would like to see an upward breakout because there is far greater potential for the price to move several hundred pips in this direction.

If it were to break out of the upper trendline and close strongly above this trendline, the price of the AUD/USD pair is likely to move above the highly significant 200-day exponential moving average, which would also encourage traders to open long positions and help to drive the price higher.

If it were to break lower, however, I think the price would struggle to break below the low of the flash crash that occurred at the start of the year.

For that reason, I think a better play would be and wait and see if the lower trendline acts as support if the price continues to fall because if it does and the price appears to be reversing back upwards again, a long position would be a decent high probability trade, and could lead to more profits it is then goes on to break through the upper trendline.

Regardless, it should be interesting to watch the future price movements of the AUD/USD pair in the next few weeks to see where it goes, and to see if there is going to be a significant breakout in either direction.

As always, the content of this article does not represent trading or financial advice. It is just my own personal thoughts and opinions. You should always do your own analysis and make your own decisions before entering any trades.

2 Inside Bar Price Breakouts on Brent Crude in May and June

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Recent Price Action

As an investor in a few oil stocks, I tend to watch the oil price very closely, and it is fair to say that the price of this commodity has been very volatile so far in 2019.

The price of Brent crude fell sharply in the last few months of 2018, but it has since rallied from a low of just over $50 to around $75 at the end of April.

After that, it then fell back towards $60 as we entered the summer, but it has once again bounced back as a result of renewed tensions in the middle east.

Inside Bar Breakouts

Ordinarily it would be very difficult to predict these large price swings, but one way you can potentially profit from these price movements is to wait for inside bar breakouts.

These occur when you have a large candle on the daily chart, followed by three or more candles / bars (the more the better) that all trade within the range of the initial candle, and then a breakout candle where the price closes outside the range of this candle.

These breakouts are generally very reliable and will often have a lot of momentum behind them, and there have been two of these in the last month alone.

Brent Crude Inside Bar Breakouts - May and June 2019

As you can see from the chart above, the first one occurred at the end of last month. On 23 May the price dropped below the 200-day moving average, which is significant in itself, but then the price traded within the range of this strong downward candle on five subsequent days (if you include the Sunday trading session).

So this was a good period of consolidation, and when the price of Brent crude subsequently closed below the range of the initial candle one week later, this would have been a great opportunity to open a short position.

In this particular instance the price went from around $64.62 to a low of around $59.27. Therefore it would have been a very profitable trade.

The second inside bar breakout has occurred more recently, and is still in progress as I write this article. After dropping back to the $60 level, there was a strong bullish candle on 13 June followed by three inside bars.

On this occasion it took a while for the price to close outside the range of the initial candle, but there was eventually a strong bullish candle that confirmed the recovery, and the price did move over 100 points in profit (and is still in progress) after closing at around $64 on the breakout.

Closing Comments

Once again this proves the overall effectiveness of inside bar breakouts, and as I have demonstrated in several posts previously, these breakouts are worth looking out for on the daily charts of many different markets, whether it’s currencies, commodities or cryptocurrencies, for example.

Generally speaking, the longer the price trades within the range of the initial set-up bar, the stronger the breakout. You just need to be patient enough to wait for them to occur because they don’t happen that often.

Bitcoin Surges Above $8000 After Inside Bar Breakout

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Previous Price Action

For a long while, it looked like the price of Bitcoin was just going to continue to trade in a sideways trading range between $3500 and $4000.

However there was a large breakout candle on 2 April, and in the following days there was enough momentum to push the price above the key $5000 level.

The price then stabilized between $5000 and $5600 for the next three weeks or so and it looked like this was going to be the new trading range in the following days and weeks.

Inside Bar

On 25 April, however, there was quite a large bearish candle on the daily chart, which propelled the price back towards $5000, and it looked like it could be heading a lot lower if it could close below this level.

As it turned out, the downward breakout failed to materialise and this actually became an inside bar because the trading range of the next seven days all fell within the high and low of this initial inside bar.

This is always a good thing to see on the daily chart because it is often the pre-cursor to a large breakout either upwards or downwards, and that’s exactly what happened here.

Upward Price Breakout

As you can see in the chart below, the price eventually broke out of this trading range (and closed above the high of the inside bar) on 3 May at $5689, and this would have been a great time to enter a long position because the price has since surged to more than $8000 thanks to the upwards momentum of this breakout.

Bitcoin Inside Bar Breakout - April May 2019

This would have represented a gain of nearly 50% for those people who held on to this position until now, but $6000 was breached fairly easily and a gain of 10-20% was still easily achievable once the momentum started building.

Final Thoughts

The point I want to get across is that as I have highlighted many times before on this site, these inside bar breakouts are always worth looking out for on the daily price charts because they can be extremely profitable.

You will generally find that the longer the price trades within the range of the initial set-up bar, also referred to as an inside bar, the more likely it is that there will be a strong breakout when the price closes outside of this range, and that was exactly the case here.

In this instance the price of Bitcoin traded within the range of the initial set-up bar for seven consecutive days, and so it was almost inevitable that the price would continue to rise strongly once the price closed outside of this range.

The problem is that these inside bars don’t necessarily occur that often, but if you monitor lots of different currency pairs, and a range of cryptocurrencies, indices and commodities, you should find a few really good set-ups every month.