BTC/USD: Long Term Time Zones and Technical Indicators
Updated
Disclaimer:
This is merely a speculative theory on Bitcoin's next potential move.
I trade based on confirmations provided, rather than predicting Bitcoin's future price action.
The future is something we need to prepare for, rather than predict.
In this post, I'll be providing my own theory based on a combination of Fibonacci Time Zones, and technical indicators
Analysis
- To begin with, we can see that Bitcoin's local tops and bottoms take place near the 618 Fib zones
- It showed local bottoms at 2.618, and 4.618, and local tops at 3.618, and 5.618
- The only exception was 1.618
- We can also see that by time zones, Bitcoin demonstrates consecutive up-trends and downtrends
- Technical indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) help our understanding
- The RSI reached overbought territories near local tops, and oversold levels near local bottoms, before a clear trend reversal
- The MACD, on the other hand, demonstrates death crosses near local tops, and golden crosses near local bottoms, after a trend reversal is confirmed
- The RSI on the weekly acts as a leading indicator, and the MACD as a lagging indicator that provides confirmation for a trend reversal
- The 200 Simple Moving Average (SMA) acts as long term trend support on the weekly, as both the local bottoms at 2.618 and 4.618 have bounced on it
- As the RSI is reaching oversold levels at the moment, passing through the 5.618 point, we could potentially expect a trend reversal
Conclusion
The chart above is a good chart to refer to for the long term. It allows traders to identify potential points of reversal, as well as key areas of support. Should this theory play out correctly, we should see a corrective trend for Bitcoin in the coming weeks.
If you like this analysis, please make sure to like the post, and follow for more quality content!
I would also appreciate it if you could leave a comment below with some original insight.
This is merely a speculative theory on Bitcoin's next potential move.
I trade based on confirmations provided, rather than predicting Bitcoin's future price action.
The future is something we need to prepare for, rather than predict.
In this post, I'll be providing my own theory based on a combination of Fibonacci Time Zones, and technical indicators
Analysis
- To begin with, we can see that Bitcoin's local tops and bottoms take place near the 618 Fib zones
- It showed local bottoms at 2.618, and 4.618, and local tops at 3.618, and 5.618
- The only exception was 1.618
- We can also see that by time zones, Bitcoin demonstrates consecutive up-trends and downtrends
- Technical indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) help our understanding
- The RSI reached overbought territories near local tops, and oversold levels near local bottoms, before a clear trend reversal
- The MACD, on the other hand, demonstrates death crosses near local tops, and golden crosses near local bottoms, after a trend reversal is confirmed
- The RSI on the weekly acts as a leading indicator, and the MACD as a lagging indicator that provides confirmation for a trend reversal
- The 200 Simple Moving Average (SMA) acts as long term trend support on the weekly, as both the local bottoms at 2.618 and 4.618 have bounced on it
- As the RSI is reaching oversold levels at the moment, passing through the 5.618 point, we could potentially expect a trend reversal
Conclusion
The chart above is a good chart to refer to for the long term. It allows traders to identify potential points of reversal, as well as key areas of support. Should this theory play out correctly, we should see a corrective trend for Bitcoin in the coming weeks.
If you like this analysis, please make sure to like the post, and follow for more quality content!
I would also appreciate it if you could leave a comment below with some original insight.
Note
Bitcoin's price is trading within an ascending parallel channel, forming lower highs and higher highs. A trend reversal would be confirmed if we see a break and close below the current channel.
We are also trading above the 0.618 Fibonacci retracement support, and a close above 13.4k can provide further confirmation for a rally towards 15-16k levels.
Note
Does Bitcoin's correction necessarily indicate a bearish trend for the overall cryptocurrency market?
In answering this question, it's important to take into consideration Bitcoin dominance, an index that demonstrates Bitcoin's relative market cap compared to the total cryptocurrency market.
Things to consider:
- While there are differences in percentage changes, Bitcoin moves in correlation with altcoins.
- In this chart, I have included Ethereum to represent altcoins, as Ethereum has been leading the bullish alt trend these past few weeks
- The highlighted areas demonstrate cases in which Bitcoin moved at a higher percentage than altcoins, but eventually this trend gets caught up
- Overall, Bitcoin dominance shows a downtrend, with breakouts in the form of spikes, as Bitcoin breaks out, marking the beginning of a bullish trend for the overall cryptocurrency market.
Note
For more insight on the relationship between Bitcoin, Bitcoin dominance, and Alts, and what the price movements imply in terms of a bigger picture, read my other analysis: The US Dollar and Cryptocurrency Market Cycles Explained
Summary:
When the US Dollar Index ( DXY ) drops, people look to invest their capital. The Dollar Index is greatly affected by macroeconomic factors. Considering that the Federal Bank is pumping out money supply at an unprecedented rate, it’s not surprising to see the US Dollar Index drop so drastically over time. The increase in money supply essentially means that the money you hold will lose its value if it’s not invested.
As such, we can clearly see that investors look to take part in the cryptocurrency market, which is clearly demonstrated through the DXY’s inverse correlation with Bitcoin . People are more willing to invest in Bitcoin , the harder the value of the US Dollar falls. When Bitcoin provides bullish confirmation through breakouts and high trading volume , investors gain more confidence in the market, and capital flows into the altcoin markets.
This study on the (inversely) correlated trends in the cryptocurrency market demonstrate that investors identify altcoins as a high-risk high-return market, while they view Bitcoin as a digital store of value.
Note
We can take a look at the shorter time frames to grasp a better understanding of where Bitcoin is at right now.
Above is the analysis of Bitcoin's 4H chart I uploaded in Oct. 01
I was looking at a bullish consolidation, with an Elliott Triangle Wave count suggesting a breakout.
Note
As anticipated, Bitcoin broke out of the triangle, and has created a textbook Elliott Impulse Wave (12345) count, touching 13.8k levels.
Note
Zooming in, we can see even more signs of bearishness.
- There is an extended bearish divergence forming on the 4H, with prices creating higher highs, while the RSI and MACD are creating lower highs
- This indicates that while the trend is still technically an uptrend, it lacks strength and momentum to drive prices further upwards
- The MACD is also looking to form a potential death cross. While this confirmation has not been provided yet, it's also important to understand that the MACD is a lagging indicator in the case of Bitcoin.
- The 20 Simple Moving Average (SMA) is acting as strong support for the short term trend
- A break below the 20 SMA would provide more confidence to bears, and a break below the 60 SMA (orange) and the Ichimoku cloud support would provide confirmation for a short term trend reversal.
Note
- As anticipated the bearish divergence has played out.
- Prices have moved from 13.8k, all the way down to 12.9k
- However, bulls continue to show tremendous strength.
- We can see that the candles have long tails, indicating that the sell orders were bought up by bulls
- The RSI is back at neutral levels
- While the 20 MA support did not hold, signs of bullishness indicate potential for Bitcoin to break back above the moving average resistance.
- In fact, the chart now demonstrates a hidden bullish divergence, with higher lows on the price, and lower lows on the RSI
Note
- The bullish divergence has played out, extending further than expected
- Connecting the wicks of the candles, we could see a clear formation of higher lows on the price, and lower lows on the RSI
- Prices have secured the 20 SMA support again
- The MACD is about to provide further bullish confirmation by forming a golden cross
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