What to know:
- Thursday’s high wave candle indicates confusion, a shift away from the recent dominance of the bulls.
- The pattern calls for caution on the part of FOMO traders impulsively seeking exposure at record valuations.
As a seasoned analyst with over two decades of market experience under my belt, I’ve seen my fair share of market fluctuations and trends. The high wave candle formation we saw in Bitcoin (BTC) on Thursday is a pattern that I’ve encountered numerous times before – it’s like watching a giant ocean wave rise and crash, only this time, it’s the price of BTC.
If you’re considering jumping into Bitcoin (BTC) right now because you don’t want to miss out on potential gains, remember that the market is currently showing signs of confusion, which is different from its recent robust bullish trend.
On Thursday, Bitcoin’s trading exhibited clear uncertainty, as it reached six figures for the first time, peaking at around $103,900 and touching new record highs. However, a sharp decline followed, taking the price down to $91,100. The day ended with Bitcoin hovering around $97,000 according to data from TradingView and CoinDesk. The price fluctuation was so significant that it encompassed all the price movements since November 20.
As a crypto investor, I encountered an intriguing market pattern known as a “high wave candle.” This unique formation is marked by a tiny real body, which signifies the narrow gap between my entry and exit prices for the day, accompanied by substantial shadows or ‘wicks’ that indicate unusually large price fluctuations throughout the trading period.
The current situation suggests that buyers are losing some grip, and sellers might regain control soon, acting as a warning for those considering entering the market now. This warning becomes more important because this pattern has emerged when the market reached new highs, indicating an inability to sustain gains above the crucial $100,000 level.
In simple terms, when the upper part of the candle is extended, it suggests that the buying pressure pushed the security’s price to a peak later in the trading day. Conversely, the lower part of the candle being elongated indicates selling pressure that pulled the price down to a trough. However, by the end of the session, the price had nearly returned to its opening level, showing signs of market uncertainty, as CMT’s explanation for high-wave candles explains.
A tall candle on a chart is called a “high wave” candle, as it resembles the long shadows (or wicks) of big ocean waves that are imagined by Japanese traders.
The significant peak candle, combined with the bearish pattern in the Relative Strength Index (RSI), a tool used to measure momentum, suggests a period of stability or potentially a short-term reversal in market direction. This bearish pattern arises when the RSI doesn’t match the new highs in prices, meaning it fails to confirm the upward trend.
The message aligns with multiple analysts voicing worries regarding congestion in long positions and the possibility of price declines.
As a researcher, I find that maintaining directional plays becomes tricky when prices stay within the boundaries set on Thursday, indicating a perplexing market situation. If it drops below this range, it might attract more sellers. On the other hand, a surge above Thursday’s high could imply a resumption of the bullish trend.
As a researcher, I’ve observed an interesting development in the BTC market: Deribit-listed Bitcoin call options expiring at the end of December now command a three volatility premium over put options, a decrease from the five or more premium we saw on Thursday, based on data from Amberdata. This change suggests that the initially high bullish sentiment may be easing.
This article’s opinions belong to the writer alone; they may not align with the views of CoinDesk, Inc., its proprietors, or its related entities.
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2024-12-06 10:21