Bitcoin (BTC) is printing a pattern which is a very rare sight in the world of technical analysis. This formation seen on the above daily chart for BTC/USD is called a compound fulcrum. It comprises of an inverse head and shoulders and a head and shoulders trading inside a wedge in the order visible above. This is a very bullish sign which often results in the price breaking straight through the wedge and eventually reaching a new high. We have seen similar patterns in the past for commodities like Copper as well as a few stocks. Bitcoin (BTC) is also currently classified as a commodity which is why it will be interesting to see how Bitcoin (BTC)’s recent compound fulcrum compares to that of Copper and a popular stock, CPST.
Bitcoin (BTC) is currently at a point where it has to make a major move. There is no disagreement among investors and analysts on that. However, where the analyses differ is in whether the move is going to be to the upside or to the downside. Most investors who believe that the move will be bearish lay a great deal of emphasis on the triangle that BTC/USD is trading in. However, those with a bullish bias lay more emphasis on the falling wedge that Bitcoin (BTC) is trading in against the US Dollar (USD). Both of these sides are laying a great deal of emphasis on structures while they ignore other important factors. One of those important factors is the compound fulcrum formation and its effects from the past.
Copper was one of the first commodities to form a compound fulcrum which is why it is often quoted as the textbook example. Between 1975 and 1979, Copper Futures entered a compound fulcrum which is very close resembles the one we see in the case of Bitcoin (BTC). If we were to compare this chart with that of Bitcoin (BTC), we should be able to see that Bitcoin (BTC) is currently at a similar point as Copper was near the end of 1978, just before a massive spike. As we can see on the above chart, the price did not stop at the top of the rectangle; it shot upwards to establish a new high. The same appears to be true for Bitcoin (BTC). As the price shoots up to the top of the rectangle for BTC/USD, we should be able to see a price close to $10,000. Towards January 2019, which would correspond to January 1979 for Copper, we should be able to see a price of $15,000 or higher as long as the compound fulcrum remains valid.
As we have seen in recent history, compound fulcrums are not confined to commodities only. The above chart for CPST shows that compound fulcrums have also been seen in stocks. Between August 2013 and December 2013, we saw CPST trade in a compound fulcrum. Towards the beginning of January, the price shot up to the top of the wedge and then broke out of it to continue a new bullish cycle. As for Bitcoin (BTC), there still remains a possibility that the current compound fulcrum might be rendered invalid. However, as long as it remains valid, there is a very high probability that Bitcoin (BTC) might have found its ultimate bottom for the next two years and could now be on the verge of a major breakout to reach a new all time high in early 2019.