Bitcoin Weekly Analysis: Mixed signals.
Last week I wrote that patience is Gold and that turned out to be very true this week. Although last week the price of Bitcoin was still hanging around $9,700 at the time of my previous column, Bitcoin's price is now over $1,200 lower at around $ 8,450. In the short term I see signs of fatigue at the side of the bears and room for a short spike upwards but on the weekly chart I see room for a further retrace to low in the 8k or even the 7k. As I told some of my follower, I would personally wait to take large long positions at this level and wait until the odds are more in favor of the bulls. As usual, let's take a look at the charts to discuss what I will look for next week.
Figure 1 - Daily chart Bitcoin coinbase.
In figure 1 above I have displayed the daily chart of Bitcoin on coinbase with three Moving Averages (MAs), a number of support and resistance zones and a falling wedge that is especially visible on the 1H chart (figure 2). The three MAs are as follows: Black line: 200-day MA, Pink line: 50-day MA, Blue line: 15-day MA.
The very first thing that strikes me - and which is also the most important hurdle for the bulls at the moment - is that the daily chart shows very well that today the price of Bitcoin found its resistance exactly at the 200-day MA. We witnessed a short rally but when that rally started this afternoon I already warned my followers not to go long too fast because the risk of the 200-day MA is right above us and this rally may prove to be an opportunity for the market to open new short positions or close long positions that are under water as good as it gets. This is also called selling-on-strength. I indicated to wait for a confirming move through the 200-day MA or until the price of Bitcoin is so interesting and on good support that the odds are in our favor but until then to just wait and hold fire. As the price of Bitcoin was surging, the 200-day MA came closer and closer and, as we now know, the 200-day MA was also the last stop where the price of Bitcoin arrived today. Subsequently, the price fell back considerably, but there is something that makes me feel bullish in the very short term and that is that I see clear signals that the strength of the current retrace has strongly decreased. This of course does not say that the current retrace is over because, as I mentioned earlier, I still see enough room for a further retrace on both the weekly and daily charts, but in the short term (for example the 4H chart and shorter) a rally to, for example the $9,200, wouldn't surprise me.
As I'm writing this, the price of Bitcoin on coinbase dips to exactly $8,400 and then surges back to $8,500. This action is the exact opposite from the action we saw over the last few weeks: the price is slowly retracing and then shoots up sharply instead of slow rallies followed by a sharp decline, even though we were rejected this afternoon on the 200-day MA! Compare this with the action of recent weeks and we can clearly see that light is beginning to shine on the horizon for the bulls. At the same time, you can also see in figure 1 and 2 that a falling wedge is visible (bullish pattern) and that the momentum indicators on the 1H and 4H graphs show Bullish Divergences. In the short term, we may therefore expect a small rally, but the very first resistance we should then look at is the 200-day MA that is currently moving around $8,750. Should this be broken then I personally see the way open to prices around $9,200 and even $9,500 because such a victory (the 200-day MA) will probably give the bulls enough confidence to think that the current bottom is in and that the rally will continue its way.
Figure 2 - 1H chart Bitcoin coinbase with momentum oscillators.
But even if the price of Bitcoin may break the 200-day MA, I would still place the Stops fairly tight underneath the 200-day MA because as long as the price of Bitcoin has not broken the $10,000 with confidence and and also established support at that level a further retrace should not be excluded. I can very well imagine that Bitcoin's price will suddenly come to a halt somewhere in the 9k and in particular around $9,300-9,500 and subsequently destroy the bulls' last bit of confidence in the short term and if that happens then we are going straight through the 200-day MA again and we will probably also make a new low for this year.
Personally, I have been looking at the $7,400 region for quite some time, and although it initially seemed far away, this entry-zone is now getting closer and becoming increasingly possible. This zone is particularly visible on the weekly chart (Figure 3) which clearly shows that this is zone is expected to form good support. A special detail - which can also be seen in Figure 3 - is that the price of Bitcoin is currently exactly enjoying support on the 21 week MA. Anyway, although this may look good for now and is an excellent entry for a short-term long trade, the long red weekly candle shows that it is really too early to be excessively bullish.
Figure 3 - Weekly chart Bitcoin coinbase.
It is of course a lot of speculation what I have just described, but that is what we are doing! The coming week certainly offers a lot of opportunities for quick trades, both long and short, but for the non-day trader I would wait until the price either breaks at least the 200 day MA or finds support at either $8,200 (the next support zone) or at $7,400-7,600. The chart is full of mixed signals and as I have described various times earlier it is helpful at these moments to zoom out to the weekly chart, to be patient and above all not to respond too quickly. Until next week!
Figure 1 - Daily chart Bitcoin coinbase.
In figure 1 above I have displayed the daily chart of Bitcoin on coinbase with three Moving Averages (MAs), a number of support and resistance zones and a falling wedge that is especially visible on the 1H chart (figure 2). The three MAs are as follows: Black line: 200-day MA, Pink line: 50-day MA, Blue line: 15-day MA.
The very first thing that strikes me - and which is also the most important hurdle for the bulls at the moment - is that the daily chart shows very well that today the price of Bitcoin found its resistance exactly at the 200-day MA. We witnessed a short rally but when that rally started this afternoon I already warned my followers not to go long too fast because the risk of the 200-day MA is right above us and this rally may prove to be an opportunity for the market to open new short positions or close long positions that are under water as good as it gets. This is also called selling-on-strength. I indicated to wait for a confirming move through the 200-day MA or until the price of Bitcoin is so interesting and on good support that the odds are in our favor but until then to just wait and hold fire. As the price of Bitcoin was surging, the 200-day MA came closer and closer and, as we now know, the 200-day MA was also the last stop where the price of Bitcoin arrived today. Subsequently, the price fell back considerably, but there is something that makes me feel bullish in the very short term and that is that I see clear signals that the strength of the current retrace has strongly decreased. This of course does not say that the current retrace is over because, as I mentioned earlier, I still see enough room for a further retrace on both the weekly and daily charts, but in the short term (for example the 4H chart and shorter) a rally to, for example the $9,200, wouldn't surprise me.
As I'm writing this, the price of Bitcoin on coinbase dips to exactly $8,400 and then surges back to $8,500. This action is the exact opposite from the action we saw over the last few weeks: the price is slowly retracing and then shoots up sharply instead of slow rallies followed by a sharp decline, even though we were rejected this afternoon on the 200-day MA! Compare this with the action of recent weeks and we can clearly see that light is beginning to shine on the horizon for the bulls. At the same time, you can also see in figure 1 and 2 that a falling wedge is visible (bullish pattern) and that the momentum indicators on the 1H and 4H graphs show Bullish Divergences. In the short term, we may therefore expect a small rally, but the very first resistance we should then look at is the 200-day MA that is currently moving around $8,750. Should this be broken then I personally see the way open to prices around $9,200 and even $9,500 because such a victory (the 200-day MA) will probably give the bulls enough confidence to think that the current bottom is in and that the rally will continue its way.
Figure 2 - 1H chart Bitcoin coinbase with momentum oscillators.
But even if the price of Bitcoin may break the 200-day MA, I would still place the Stops fairly tight underneath the 200-day MA because as long as the price of Bitcoin has not broken the $10,000 with confidence and and also established support at that level a further retrace should not be excluded. I can very well imagine that Bitcoin's price will suddenly come to a halt somewhere in the 9k and in particular around $9,300-9,500 and subsequently destroy the bulls' last bit of confidence in the short term and if that happens then we are going straight through the 200-day MA again and we will probably also make a new low for this year.
Personally, I have been looking at the $7,400 region for quite some time, and although it initially seemed far away, this entry-zone is now getting closer and becoming increasingly possible. This zone is particularly visible on the weekly chart (Figure 3) which clearly shows that this is zone is expected to form good support. A special detail - which can also be seen in Figure 3 - is that the price of Bitcoin is currently exactly enjoying support on the 21 week MA. Anyway, although this may look good for now and is an excellent entry for a short-term long trade, the long red weekly candle shows that it is really too early to be excessively bullish.
Figure 3 - Weekly chart Bitcoin coinbase.
It is of course a lot of speculation what I have just described, but that is what we are doing! The coming week certainly offers a lot of opportunities for quick trades, both long and short, but for the non-day trader I would wait until the price either breaks at least the 200 day MA or finds support at either $8,200 (the next support zone) or at $7,400-7,600. The chart is full of mixed signals and as I have described various times earlier it is helpful at these moments to zoom out to the weekly chart, to be patient and above all not to respond too quickly. Until next week!
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