Bitcoin’s Massive “Cup and Handle” Formation Can’t Be Ignored

Stocks are falling today just one trading session after the Dow hit 30,000. In response to poor weekly jobless claims data, the “vaccine rally” is taking a pause.

But it shouldn’t come as much of a surprise to investors. Historically, the market has tended to quiet down before Thanksgiving. Trading volumes dip lower than usual and the major indexes don’t typically move all that much.

Today, though, with the Dow, S&P, and Nasdaq Composite all near their record highs, it’s certainly not a good time for them to slowly tumble. Energy and financial stocks are among the biggest losers as of noon, as is Salesforce (NYSE: CRM), which just announced plans to potentially acquire Slack Technologies (NYSE: WORK).

After the news about the possible acquisition broke, CRM shares fell 2% while WORK surged for a gain as high as 25%.

Still, the market seems optimistic. A 30,000 Dow, while not necessarily significant in its own right, may reflect just how confident bulls are about an economic recovery.

“The Dow passing 30,000 represents the achievement of an arbitrarily-set milestone, but it also captures the sentiment of the moment for investors,” remarked Scott Knapp, chief market strategist at CUNA Mutual Group.

Other analysts specifically pointed to the ongoing growth-to-value rotation as a sign of strength.

Independent Advisor Alliance chief investment officer Chris Zaccarelli said the shift is “notable,” because it’s occurred “despite the negative news flow of Covid cases surging around the country and lockdowns again being imposed in various parts of the nation.”

Peter Cardillo, chief market economist at Spartan Capital Securities, isn’t so convinced that the market can continue punching higher, high.

“A lot of future positive news regarding the economy and the virus has already been discounted,” Cardillo warned. “The market can keep going higher from here […] but not by too much.”

The same kind of thing was said about Bitcoin several weeks ago before it erupted for a major gain and hit $19,000 per coin. Institutional investors are jumping on board the digital currency train, and in the process, have provided a major boost to the world’s most popular crypto coin.

But, much like with the stock market, the question now is how much further Bitcoin can run. It’s currently trading right below its all-time high after breaking past key resistance (blue line) in late October.

Back then, traders were wary of a “cup and handle” formation (purple). The cup formed, but the handle never came.

Now, an even larger cup – spanning almost 3 years – has been completed. If a handle follows, it could end up dropping back down to the closest point of former-resistance-turned-support (blue line). Which, in this case, sits at roughly $14,000.

If that happens, scores of analysts will surely deem Bitcoin “dead in the water.” But really, it would represent a massive buying opportunity.

The “buying window” would likely be short, too. Retail investors would need to act fast before the institutions snap up Bitcoin at a major discount.

Alternatively, should Bitcoin rise past its all-time high, another insane crypto run-up could ensue.

Just like in late 2017, when Bitcoin topped out just shy of $20,000.

Of course, anything could happen at this point. Bitcoin could sell-off below $14,000, too, or simply “chop sideways” from here.

But investors of all types, including those not involved in crypto, should be watching Bitcoin’s movement closely over the next few weeks.

All while fiat currencies continue to weaken.


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