Agreed. Nothing is sure, but volatility can shake out the weak hands. Our thesis could be wrong or we may have the wrong timing, in which case we lose stopped out in the $220s. If our thesis is correct, we loaded up in the $230s and maximize ROI selling in the $300s.

We rose off a base of very low volatility which every time in the past has corresponded to a significant rally. If volatility is rising, it can also be on the downside flag, midway through the rally.

On the Bitstamp candlestick chart, the rally began from $218 and reached $258, thus as a midway flag pattern, this would project a peak price of $297. However, normally you want to look at percentage moves (midway on a log scale), thus 258/219 = 1.178 x 258 = $304 projected peak. The second leg of the flag pattern can nosebleed exceed the projected peak (often on an intraday candlestick, not a closing price).

It really looks like a flag pattern to me. If you draw a line from the $218 along the bottom of the candlesticks, the recent move down has not yet broken significantly through this line. If it closes below this line, I'd get worried.

Technical analysis is basically useless if you don't also have some other thesis from which gives you confidence. We have the repeating low volatility preceding a major rally thesis. We also have the seasonal rise thesis. We also have the thesis that the markets always move in the direction to harm the most greater fools combined with the coming contagion by October, thus a relief rally to suck in more "HODLers to the moon" is apropos.