Why? Because an asset that moves up, consolidates then breaks up, the asset can take off with no resistance above it. In crypto, this happens at an extremely fast pace so breakout trading can help you generate quick profits without having to keep capital in an investment for months.
QTUM is setting up for a good mid or short term trade. (I like it for the long run too)
You can see the cup formed and now the handle is forming. We are now consolidating just below highs. QTUM is building up energy and constantly testing that .00400 resistance line. The resistance is like a brick wall, but every time we hit that wall, we are taking away bricks (eating sell orders). Then it comes back down and takes another run to take out more bricks. Eventually, the wall comes down and its open skies above.
When I'm looking for a breakout, I like to look at the hourly chart and see this kind of strong consolidation. There is more risk when you buy a breakout that has had less consolidation (say a 5 min or 15 min chart).
I set up fib levels to give me an idea of potential pullback areas because it certainly could pull back much further before it breaks out.
You can trade this in several ways.
1. Invest (Long Term) - Just buy and have patience and add if it drops.
2. Swing Trade (Mid Term)- Buy near the bottom of the line. And just stop out if it goes lower and look to add at the 50 or 618 fib
3. Break Out Trade (Day trade) - Wait until it breaks out over .004 and then put a stop under the ascending trangle or last dip on a 15 minute chart.
Short term target is .0052 which would be a 25% profit. Often when they break, they can get to that measured move within 24 hours before they take a break and pull back.
DYOR and if you take this short term, realize you can get stopped out.
As this pattern looked healthy, bitcoin broke out of a triangle with high volume and jumped $1500 in a 2 hour period. Almost every alt coin like QTUM dropped hard.
QTUM dropped to .003200 - the exact .786 fib level on a very sharp, quick move. It's now holding at .0035.
At this point, I consider the formation invalid in the short term. In the mid term its a good hold as long as it holds that .0032 low. But if Bitcoin goes on a tear then that that could easily take out alt coin formations.
I'm still neutral on bitcoin. I need to see $16200 breached, hold and consolidate in that area before I see it making new highs.