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The Yin and Yang of Bitcoin: Exploring Both Bullish and Bearish Scenarios

The Yin and Yang of Bitcoin: Exploring Both Bullish and Bearish Scenarios
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Introduction: In our most recent post, we delved into the potential downside for Bitcoin before another major upward leg. However, it's essential to maintain an open mind and consider alternative scenarios. In this article, we'll explore a possible bullish setup, while also revisiting our bearish outlook, and discussing how to approach trading under these circumstances.

A Bullish Perspective: Breaking the Descending Trendline Examining the daily chart below, we can observe a clear break of the descending trendline. After the break, the trendline was retested almost flawlessly, resulting in a significant bounce back to the upside.

This development is undoubtedly a bullish factor worth considering. Assuming further upside, what might be our target based on the trendline break? A one-to-one extension of the trendline break projects a target of $40,200. This level aligns perfectly with a low-volume node slightly above the range Point of Control (POC) at $39,820.

Thus, if you're considering a long trade from the current level (or perhaps you're already in one), this target presents a reasonable point to take profit.

Balancing the Bullish and Bearish Outlooks With both bullish and bearish outlooks in mind, let's overlay our Elliott Wave count to gain a comprehensive view of the situation.

So, how do we plan to trade in light of these competing scenarios? At the moment, I have no open positions and confess that I'm gradually leaning more towards the bullish side. Currently, Bitcoin is trading within a range of $26,500 to $31,050, with the POC of this range at $28,070.

Applying a Fibonacci retracement from the most recent swing low to swing high, we find the 0.382 retracement at $28,847 and the golden pocket at $28,205. The golden pocket aligns relatively well with the range's POC. However, I'm not in favor of trading from the POC (except for nPOCs). As such, I'd prefer to seek a long trade around the 0.382 retracement. Since this level is close to the current Value Area High (VAH) of the range, it's feasible to enter a long trade with a fairly tight stop, as a sustained price below the VAH could indicate the POC and possibly the Value Area Low (VAL) as the next targets. Given the previously mentioned targets, this approach should yield a favorable risk-reward ratio.

To be continued...