– Short term bull flag on the hourly chart for the aggregate altcoin market.
– Continuation of the short term bull move is necessary for continued higher prices.
Altcoin Short-term Bull Flag
The chart above is Tradingview’s chart for the cryptocurrency market minus Bitcoin – often just called the altcoin market chart. There are three charts above: Daily on the top left, 4-hour on the top right, and 1-hour on the bottom. There is a clear and present bullish continuation pattern on the 1-hour chart: a bull flag. Bull flags are one of the most common patterns that appear after a recent uptrend. Bull flags are continuation patterns and have a high probability of continuing the prior trend. This particular bull flag is a high and tight flag. According to Thomas Bulkowski – hands down the most prominent expert on chart patterns – this High and Tight bull flag pattern is the single highest-performing bull chart pattern in his rankings. However, it should be known that this pattern, while bullish, is still on a faster pattern, which is inside of a larger bearish pattern.
The 4-hour chart (top right) shows sustained downside pressure for the past consecutive four candlesticks. There does appear to be some support being found against the 4-hour Tenkan-Sen. We should also observe the price action since the break of the cloud. There is a Kumo Twist that occurred just seven candlesticks ago. Price will frequently burst out of these zones with significant strength if trading near the twist – which is precisely what happened. The near term resistance on the 4-hour chart for altcoins is just above the Chikou Span – which is currently inside the cloud. The Chikou Span responds to the same support and resistance levels that price does, and if we want to see an extremely bullish move higher, then the Chikou Span needs to breakout above the Cloud. That would be fulfilled if price can move to 68.8 billion.
That brings us to the daily chart. In contrast to the strength of the 1-hour chart’s bull flag, the daily chart is displaying one of the most robust bearish continuation patterns, the inverse of a bull flag: bear flag. Inside any flag pattern, one of the common behaviors we should observe is volume to drop inside the flag. That has occurred. Before a breakout from the flag, we should find a spike in volume. Yesterday’s volume was above the 30-day average, as is today’s volume. We could see today’s volume exceed the yesterdays but experience a tighter trading range. Even if price does breakout above the bear flag, I believe we would see some limited moves higher due to the near term resistance at the daily Kijun-Sen and the bottom of the cloud just above that. This could create a significant bull trap that could result in a flash crash lower.
The altcoin chart is a study in the fractal nature of markets. First, we see the 1-hour bull flag, which is inside a daily bear flag. And that daily bear flag is inside a weekly bull flag. While that weekly bull flag is not shown, price is close to testing the upper trendline of that bull flag. With the hourly chart showing such a dominant bullish continuation pattern against the top of its trendline, we could very well see a setup for a much bigger and broader bull market over a more extended time.