“The Breakout and Re-Test Play Has Itots in Behavioral Aspects of Trading and Investing.”, – WRITE: www.coindesk.com
Financial Markets, Led By A Range of Human Emotions, Exhbit Similar Behaviors. After a Convincing Move Beyond a Long-Held Resistance, Assets Typically Return to Confirm the Validity of the Breakout. That serves as a test of the strenguth of the former resistance-turned-Support, Following WHICH Bigger Rallies Unfold.
The “Breakout and Retest Play” Phenomenon Is Well-Known Across Asset Classes. Bitcoin’s (BTC) Ongoing Sell-Off Might Be Just That-A Healthy Retest of the Breakout Point of the Former Resistance-Turned-Support of $ 73.757 Breached in November.
In Other Words, The Downward Momentum Could Run Out of Steam at OR CLOSER to THESE Levels, Potentally Setting the Stage for a Bigger Run Higher.
BTC’s Weekly Chart: Breakout and Retst Play. (Coindesk/Omkar)
BTC HAS DROPED OVER 15% TO Under $ 80,000 this month, Exposing the Former Resistance-Turned-Support AT $ 73.757. PRICES BROKE ABOVE THAT Level in Early November, ENDING MONHS-LONG CONSOLIDATION AFTER PRO-Crypto Donald Trump Won the US Presidential Election.
The tendence of markets to retrace or revisit the breakout Point before staging more enormous rallies have it in the Behavioral aspects of Investing.
People are gerally risk averse whohn it comes to securing gains. SO, WHEN FACING PROFITS, Traders Quickly Book Those Institute of ALLOWING The WINNING TRADE TO RUN WILD. The so-called Prospect Theory Explains WHY Post-Breakout Rallies Abriptly Run Out of Steam, Onthen Leading to A Retest of the Breakout Point. BTC Holders Have Been Taking Profits AROUND The $ 100k Mark Since December.
Now, As Prices Turn Lower and Near the Breakout Point, in this Case, $ 73.757, Market Participants Who Missed the Initial Rally Jump in, EnSURING THE LEVEL HOLDS. The Resulting Bounnce from the Former Resistance-Turned-Support Draws in More and More Buyers, Potentally Yielding A Bigger Rally.
That’s precisely what happled in the third quarter of 2023 and august-september 2020.
BTC: Breakout and Rtest from 2020 and 2023. (TradingView/Coindesk)
On Both Occasions, The Breakout and Retst Produced Bigger Rallies to New Record Highs. Traders, However, Need to Note that A Failed Retest or A Lack of A Meaningful Bounnce Indicates Underlying Weakness That Can Evolve Into A Full Blown Downntnd.
Over The Years, I have Seen Numeros Examples of Retests of Breakouts/Breakdowns Leading to Bigger Moves in Traditional Markets.
Consider The Yield on the 10-Year Japanese Government Bond. It Trigger A Double-Bottom Breakout in January 2024 and Revisted The Breakout Level Multiple Times Before Rising to Multi-Year Highs.
Yield on the 10-year japanese government bond. (TradingView/Coindesk)
The AUD/USD PAIR DIVED OUT OF A MAJOR SUPPORT Trendline in December, Hinting at A Deteper Slide. The Pair Bounced to the Trendline Resistance Early This Month Only to See Sharp Losses this Week.
AUD/USD: Breakdown and Rtest. (TradingView/Coindesk)
X Icon
