The "Four Red Roosters" Pattern
The "Four Red Roosters" pattern, as noted by trader Peter Brandt, is an important signal for traders indicating a possible continuation of the bearish trend. This pattern includes several key components that allow traders to analyze market conditions and make informed decisions.
1. Decline in BTC Price
The decline in the price of Bitcoin is the primary element of this pattern. When the price of BTC consistently decreases, it may indicate market weakness. It's important to note that price declines can be caused by various factors, including:
- Negative News: Regulatory restrictions, exchange hacks, or other negative events can lead to panic among investors.
- Changes in Sentiment: Trader psychology plays a crucial role; panic selling can exacerbate the decline.
- Technical Levels: Breaching key support levels can trigger further price drops.
2. Decrease in Volatility (ATR)
The Average True Range (ATR) measures an asset's volatility. A decrease in ATR indicates that the market is becoming less volatile. This can mean that:
- Market Participants Are Expecting New Movements: Low volatility often precedes significant price changes.
- The Market Is "Calming Down": Reduced volatility may signal that traders are uncertain about their actions, which can lead to position accumulation before the next movement.
3. Increase in ADX
The Average Directional Index (ADX) is used to assess the strength of a trend. An increase in ADX in the context of the "Four Red Roosters" indicates the following:
- Strengthening of the Bearish Trend: An increasing ADX value (typically above 20) suggests that the current trend is becoming more stable and strong.
- Confirmation of Direction: If ADX rises while the price falls, it confirms the bearish sentiment in the market.
4. Decrease in Trading Volumes
Trading volumes are an important indicator of market participants' interest. A decrease in volumes can mean:
- Declining Interest: If volumes drop, it may indicate that traders are losing interest in the asset, which could lead to further price declines.
- Liquidity: Low volumes can also reduce liquidity, increasing the likelihood of sharp price movements.
Interpretation of the Pattern
Each of these components plays a crucial role in interpreting the "Four Red Roosters" pattern. Let's examine their interconnections:
- Low ATR combined with rising ADX suggests that the market may be preparing for a new movement, likely a bearish one.
- Falling volumes indicate reduced interest, which can strengthen the bearish trend, as fewer participants can lead to greater volatility and sharp movements.
Current Market Situation
As of June 22, 2025, the price of Bitcoin fell to $98,213 but later bounced back above $100K, currently trading at $101,165. Despite this temporary recovery, Peter Brandt emphasizes that the overall picture remains negative. He believes that:
- The Market Continues to Be Under Pressure: Negative signals from the pattern may indicate further declines.
- Traders Should Exercise Caution: It is important to consider current indicators and avoid excessive optimism.
The "Four Red Roosters" pattern is an important signal for traders indicating a possible continuation of bearish movements. Traders should closely monitor the dynamics of ATR, ADX, and trading volumes to make informed decisions. In conditions of market uncertainty, it is crucial to remain vigilant and adapt strategies based on current signals and market changes.
