I have written many times about the appeal of investments that are breaking out from a consolidative base. Often times, depending upon whether there is a pattern formed within that consolidation, it can provide a target price for that breakout move. Keep in mind, targets best used solely as a way for investors to calculate and manage risk, definitely not a guarantee. But, if they eventually meet their target, many times it is not the end of the move … it could be just the beginning. It all depends upon price structure at that time.
Recycling the bitcoin chart GBTC from my April 10th follow-up blog post, the breakout from the consolidative base led to a quick 40+% gain, peaking just slightly above its target, T1. Initial breakout targets also provide information about where the next level of consolidation is likely to occur, if the target is achieved. Back to the GBTC chart, right on queue it did exactly as expected after acheiving its initial target, it began to consolidate and has been doing so for 3 weeks. That consolidation has allowed the froth to unwind and allow those that wanted to sell, the opportunity. What I never talk about with breakout opportunities is the possibility the initial breakout being the start of a much bigger move. Something that would extend much further than just the first upside target. In the case of GBTC, this seems like a real possibility. During the recent consolidation after reaching its intiail upside target, GBTC has formed another bullish pattern which points to an even larger upside target, T2, if the pattern should confirm. Confirmation, of course, is validated through a gap or strong move above the pattern’s neckline (green horizontal line) with volume that is significantly greater than its current average. A back-test and hold of the neckline after breakout would be welcomed and provide investors who missed out, an excellent, low risk chance to enter a position and get involved in round 2 of what looks to be a continued bitcoin run