Bitcoin’s Accumulation Zone: A Wyckoff Perspective
To do this, I would like to comment on my vision, together with that of Wyckoff, one of the great masters of international technical analysis.
Richard Demille Wyckoff was an American stock investor who developed the Wyckoff method of analyzing financial markets.
In 1907 he founded and edited the Magazine of Wall Street. He was also the editor of Stock Market Technique.
For those who do not know me yet, I can work in investment, both worlds, TradFi and DeFi, and I am a technical, fundamental, macro and also onchain crypto analyst, but that does not mean that as a professional, I rely on other companions along the way, to unite my vision with theirs, and in a complementary way, to be able to try have better vision for investment decisions. Understand, as always, that my articles and texts are not investment recommendations, and that each person must make their own decisions; As they say in the crypto world, DYOR.
Wyckoff Accumulation is a technical analysis trading strategy that was developed by Richard D. Wyckoff, a prominent trader and market analyst in the early 20th century. This strategy is designed to identify potential trends and reversals in financial markets, particularly in stocks and commodities. It is based on the principles of supply and demand, as well as the psychology of market participants.
The Wyckoff Accumulation phase is one of the key components of this strategy. It occurs in a trading range, typically after a prolonged downtrend, and it represents a period of accumulation by smart money or institutional investors. During this phase, the following characteristics are observed:
Range-bound Trading: Prices trade within a relatively narrow range, forming support and resistance levels. This indicates a balance between supply and demand.
Decreasing Volume: Volume tends to decrease as the range develops. Lower volume suggests that the selling pressure is diminishing.
Selling Climax: Often, the accumulation phase starts with a sharp and high-volume selling climax. This is a final capitulation by weak-handed traders.
Signs of Accumulation: As the accumulation phase progresses, there may be subtle signs of accumulation, such as slight price increases on lower volume or the formation of higher lows.
Breakout: The accumulation phase ideally concludes with a breakout above the resistance level. This breakout signals that demand has overcome supply, and a new uptrend may be underway.
The theory, we already have it. But what about practice?
Today, we will do the practice with the bitcoin chart.
Bitcoin is in an area of great accumulation, within its bullish crypto spring movement (which is where I think it is, since it touched $16,000 and began to rise with rising highs and lows. The crypto winter is already behind us, but that does not mean that it has to rise strongly, but it is doing so and since its lows, it has already doubled its price, literally).
In the following graph, we can find two analyzes:
1. The first is the linear identification of the area where it is located. I have painted a line, where it is observed that the price has had and has strong reactions in this area. Both in bullish rejection and in bearish rejection.
The red arrows indicate that the price has difficulty continuing to rise and the blue arrows indicate that the price has difficulty continuing to fall.
It is a very important area.
2. Here we will use the methodology of my analyst colleague that I have presented to you today.
We are in the short term, in an accumulation zone 2 according to their system, or at least, that is my vision of the price of bitcoin and its situation.
LPS: Last point of support, is the minimum of a reaction or recoil after an SOS. Performing an LPS means a retreat to the support that was previously resistance, in a smaller price and volume range. On some charts, there may be more than one LPS, despite the seemingly singular precision of this term.
It is therefore an LPS that I observe in the graph.
It is the second blue arrow, which corresponds according to my vision, with the LPS in bitcoin (In the ultra short term).
Because in the long term, which is not shown on this chart, the price is in BU/LPS zones. Since we can apply Wyckoff in different time phases. But let’s not lose the focus of the article. Let’s focus on the ultra short term, to understand where investment decisions are and should be made now, since the future and the past no longer affect us.
And as I always say, no one has a crystal ball, but analysts, what we try to do is find out, without certainty, what a price could do next. Remember that this analysis is not an investment recommendation, but rather my view on the current situation of a price, which in this practice, it has been Bitcoin’s turn to be analyzed in real time.
Remember, talk to a financial advisor before making any investment decision, if you do not have sufficient knowledge to invest in crypto assets or any financial instrument.
Happy Thursday to everyone.