The Bitcoin Market Through a Gann Lens
As this article is my debut article here at CCN.com, I will endeavour to explain the tool I rely on more than any other when trading Bitcoin, forex or commodities. It is called the Gann Square. Unfortunately, like most of William Gann’s remarkable discoveries, the Square is overlooked, misunderstood and largely unknown to the trading public at large.
In this first article, we will look at the Bitcoin weekly chart, that we may get a long term overview of the Bitcoin market. At the same time, we will also get a rough idea of how the square works to help us locate support, resistance, and energetic time periods.
Gann Square Setup
Here is a weekly Bitcoin chart, with a 21 candle Gann Square setup (I will just refer to it as “the setup” going forward.)
In the lower left-hand corner, you see a single blue arc which from the origin touches the top of the April 2013 high. That first arc encompasses 21 candles prior to the 4/2013 high.
We have a square around that initial arc with sides exactly equal to the radius of that first arc. That 1st square is replicated precisely throughout the 5×5 grid of squares you see before you.
You will also note that there are five arc pairs. And of course you will notice the familiar Gann fan lines. The blue line is the 1×1 line. The two red lines are 1×2 and 2×1, and the yellow line on the bottom is the 3×1.
Firstly, look at the maroon star at the bottom of the setup. Note that the great bull market of 2013 began just as the price entered the first arc pair, and took off as soon as it exited the first arc pair. That 1st arc pair is not only support and resistance, but it marks an “energetic time”.
Now look at the area marked by blue star and note that the bull market ended 11/29/13 when the price touched the 4th arc pair. In fact, if you study this chart carefully, you will see that EVERY line and every arc on the setup is Support and Resistance.
After the bounce in April 2014, just above the 2nd arc pair, price once again climbed until it hit the 3rd arc pair. The 3rd arc pair “captured” the market and would not let it go for the next six months! Price was held by that arc pair from May 2014 until November 2014. Six months of a down trend ensued as the market tried but could not overcome the tremendous resistance of the 3rd arc.
Now look at the area marked by a red star. Price finally found support at the top of the 1st square. For the next six weeks, as the market fought its way through the 3rd arc pair, the top of the 1st square provided unbreakable support.
Now, as you may have noticed, the market price is, as of this writing, making a green candle on the other side of the 3rd arc. If the candle closes far enough outside of the arc to have cleared the stubborn resistance of the arc, this will be quite bullish for the market on a weekly level. In fact, a buy signal will be given if/when that happens.
However, until the candle closes, and does so convincingly free of the 3rd arc, be wary of premature bullish optimism. It is still entirely possible that the market will continue to follow the arc DOWN for another couple weeks on the other side! I’ve seen that happen so many times I’ve lost count.
I suspect that even if that scenario happens, the yellow Gann fan line and the top of the square will provide firm support. But of course, time will tell…
IMHO, the worst case scenario is that the Bitcoin bear market has only 1-2 weeks left. Best case is that the bull will clearly come to life within days of this writing.
In future articles, we will look at this market through the lens of the Gann Square in many different time frames.
Happy Trading all!
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Images from Shutterstock.
