Bitcoin Bullish Setup: The Three Reasons Why BTC Is Set To Rise Based On Charts & Data

Key Concepts

• Bare Flag: A bullish chart pattern indicating potential upward price movement.
• Bull Flag Consolidation: A specific type of bull flag characterized by tight price consolidation within a range.
• January Effect: A seasonal market anomaly where asset prices tend to rise in January, potentially due to tax-loss selling in the preceding months.
• Tax-Loss Selling: The practice of selling losing investments to offset capital gains taxes.
• Trend Line Analysis: Identifying potential support and resistance levels by connecting significant highs or lows on a chart.
• Retracement: A temporary price movement against the prevailing trend.
• Cycle Lows/Highs: Identifying significant price points in recurring market cycles.
• Bottoming Tail: A candlestick pattern suggesting a potential reversal of a downtrend.
• Psychological Data Points: Market sentiment and investor behavior influencing price action.

Technical Analysis Shows Bullish Bitcoin – A Detailed Summary

Introduction

Gareth Soloway presents a bullish outlook for Bitcoin in early 2026, based on technical analysis, seasonal patterns, and market psychology. He emphasizes a data-driven, non-emotional approach to trading, contrasting his analysis with overly optimistic predictions from other analysts. He also explains why the current cycle’s potential downturn may be shallower than previous ones.

I. Near-Term Bullish Signals (January 2026)

Soloway begins by analyzing the daily Bitcoin chart, identifying a “bare flag” formation. He explains that a bare flag suggests a likely upward move in the near term, with potential resistance at a previous high. He notes the technical support level indicated by the yellow line within the flag.

Further zooming in, he highlights a “bull flag consolidation pattern” – a wide range green candle followed by candles staying within its boundaries, even in their wicks. This pattern reinforces the bullish signal. He emphasizes that as long as the support line of the bare flag holds, the upside potential significantly outweighs the downside risk.

II. The January Effect and Tax-Loss Selling

A key argument for the bullish outlook is the “January effect.” Soloway explains that investors often sell losing assets (like Bitcoin and altcoins) before year-end to offset capital gains taxes. This creates downward pressure. However, this pressure is relieved in January when tax-loss selling is no longer possible, leading to a potential bounce in previously beaten-down assets.

He specifically points out that Bitcoin ETF investors, unlike long-term “hodlers,” may be motivated to realize losses to offset gains in other investments, exacerbating the year-end selling pressure.

III. MicroStrategy Stock as a Bitcoin Indicator

Soloway draws attention to MicroStrategy (MSTR) stock, noting a “bottoming tail” pattern – a reversal signal on the chart. He argues that MicroStrategy’s performance is closely tied to Bitcoin’s price, as the company holds significant Bitcoin reserves. A rising MicroStrategy stock could therefore indicate positive momentum for Bitcoin. He acknowledges the current bearish sentiment in the crypto sector, suggesting that extreme bearishness often precedes a market reversal.

IV. Identifying Chart Action: A Simple Trend Line Approach

Soloway contrasts his analytical approach with the complex predictions of other analysts, advocating for simplicity and logic. He demonstrates a method for identifying potential tops by connecting the high from the 2017 bull market to the high in 2021. He explains that Bitcoin repeatedly tested this trend line in 2025 without breaking through, suggesting it acted as strong resistance. He stresses the importance of letting the chart “prove itself” before assuming a breakout. He states, “make the chart prove itself before you jump to that conclusion.”

V. Why This Cycle’s Downturn May Be Shallower

Soloway argues that the current cycle’s potential downturn may be less severe than previous ones. He points to past cycles, where Bitcoin retraced to the previous cycle’s high (or slightly below). He notes that the 2017 and 2021 cycles saw drawdowns of 76% and 82% respectively.

He then analyzes the current chart, suggesting a potential support level around $65,000-$70,000, which would represent a drawdown of approximately 45-50% from the recent highs. This is significantly less than the drawdowns seen in previous cycles. He posits that this shallower decline could be due to the established support zone from the 2021 highs. He acknowledges the potential for a head and shoulders pattern forming, but maintains his view of a less severe correction.

VI. Psychological Factors and Market Sentiment

Soloway emphasizes the importance of psychological factors, noting the widespread bearish sentiment in the crypto market. He uses the analogy of a “teeter-totter,” suggesting that extreme bearishness often leads to a market reversal. He contrasts the hype surrounding silver with the negativity surrounding Bitcoin, implying a potential shift in sentiment.

VII. Personal Trading Philosophy and Experience

Soloway shares his personal trading journey, emphasizing the importance of logic and emotional detachment. He recounts his initial struggles as a trader and how he turned the corner by focusing on chart analysis and probability. He states, “once you become logical you don’t go backwards really.” He highlights the value of a disciplined, data-driven approach to trading.

Conclusion

Soloway presents a compelling case for a bullish outlook on Bitcoin in the near term, driven by technical patterns, the January effect, and market psychology. He cautions against emotional trading and emphasizes the importance of a logical, data-driven approach. He also suggests that the current cycle’s downturn may be less severe than previous ones, offering a more optimistic perspective for long-term Bitcoin investors. His analysis provides actionable insights for traders and investors seeking to navigate the volatile crypto market.