Bitcoin Enters a Consolidation Period
After an astonishing breakout of the $20,000 resistance, Bitcoin appears to have entered a consolidation phase between $22,000 and $24,000.
Consolidation Importance
A bull market without any correction or consolidation is like a building without a foundation: it is shaky, and can collapse at any time. Therefore, consolidation helps bring stability to the market. When an asset is consolidating around a price level, that price level becomes important. Thus, the $22,000 and $24,000 price levels will likely act as support or resistance long into the future.
The Hourly Chart
Although we usually use the 1 day or 4h chart to showcase the current trend, the 1h chart is also among the most important timeframes. Many swing traders identify the trend on the 1 day and 4h chart, and use the 1h chart to time their entries and exits. On the other hand, intraday traders use the 1h chart to identify the trend direction, and then time their entries and exits on the 5 minutes and the 1 minute chart. Therefore, the hourly chart stands as the bridge between swing traders and day traders, making it one of the most used timeframes. Generally, the more popular a timeframe is, the more reliable it becomes.
The 150 EMA, which works well on the 4h chart, also works well on the 1h chart, albeit slightly different. On the 4h chart, this indicator can be used to point out the long term trend, and by long term we mean the trend of the next 1-6 months! On the 1h chart the 150 EMA can effectively determine the medium-term trend that usually lasts between 1-6 weeks. If the price starts hitting it sporadically in a short period, it may indicate that the uptrend has come to an end, and we are in a ranging market.
Consolidation Importance
A bull market without any correction or consolidation is like a building without a foundation: it is shaky, and can collapse at any time. Therefore, consolidation helps bring stability to the market. When an asset is consolidating around a price level, that price level becomes important. Thus, the $22,000 and $24,000 price levels will likely act as support or resistance long into the future.
The Hourly Chart
Although we usually use the 1 day or 4h chart to showcase the current trend, the 1h chart is also among the most important timeframes. Many swing traders identify the trend on the 1 day and 4h chart, and use the 1h chart to time their entries and exits. On the other hand, intraday traders use the 1h chart to identify the trend direction, and then time their entries and exits on the 5 minutes and the 1 minute chart. Therefore, the hourly chart stands as the bridge between swing traders and day traders, making it one of the most used timeframes. Generally, the more popular a timeframe is, the more reliable it becomes.
The 150 EMA, which works well on the 4h chart, also works well on the 1h chart, albeit slightly different. On the 4h chart, this indicator can be used to point out the long term trend, and by long term we mean the trend of the next 1-6 months! On the 1h chart the 150 EMA can effectively determine the medium-term trend that usually lasts between 1-6 weeks. If the price starts hitting it sporadically in a short period, it may indicate that the uptrend has come to an end, and we are in a ranging market.
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