BTC May Take the Scenic Route
Updated
Regardless of whether you are a bear or a bull, BTCUSD will probably take the scenic route. This may sound like max pain theory, and it probably is.
One follower asked recently for an update on BTC. My last BTC post called for another push higher before going lower. A the time that was published, BTC traded in the upper 18000s and the downward TL (log scale) was just overhead. BTC then moved higher to the downtrend line, paused, and then broke above it. This coincided with major US equity indices and many other risk assets that broke above similar down TLs. This removes some of the certainty that an effective downtrend line provides, i.e., it contains price and provides a reasonable entry point for short positions in a downtrend and reasonable entry point for long positions in an uptrend.
For those who think the break of an uptrend is conclusive signal that price is returning to all-time highs, beware of the history of past bear markets in equities. This happened with SPX in 2000-2002. A chart of SPX from 2000-2002 is also included to show the break of the down TL that eventually failed.
Supplementary Chart A
SquishTrade does not assert that BTC will necessarily follow this pattern in SPX shown by a upside break of its major down TL in the 2000-2002 bear market. Rather, this example serves to illustrate why a trendline break alone isn't necessarily and all-clear signal or a trend-reversal signal on a larger time frame. It just takes away some of the certainty that had existed when that trendline effectively contained price below it, and reversed price every time it rallied to meet it.
Furthermore, a down trendline is not the only measure of a trend. Moving averages, Ichimoku Cloud and others perhaps capture the more flexible nature of a trend, and include a cushion (much like the wider cloud does within the Ichimoku system). Not every market participants market memory is at the same exact angled line. Using a weekly Ichimoku Chart, BTCUSD remains in a downtrend, characterized by the very wide cloud that is red colored (because the Senkou Span B line remains above the Senkou Span A line—bullish would be a green cloud where the SSA line is trending above the SSB line), and confirmed by price trending well below the cloud.
Supplementary Chart B (Ichimoku Cloud Weekly Chart)
The daily Ichimoku Cloud chart, however, looks quite bullish. Price has broken above the cloud, the cloud has turned green, and things look hopeful on this timeframe. So why is price stalling? Probably because major resistance lies overhead despite what shorter time frames suggest.
Another measure of trend includes VWAPs and long-term moving averages. The VWAP from the November 2021 all-time high lies around 30,000 today. The 50-week moving average, interestingly, lies right at the major resistance level shown by the blue rectangle sitting at mid-August 2022 highs. This 50-week MA (not shown) is at 25,040 today. The 100-week MA is even higher. These are important trend measures as well and lie overhead and slope downward.
Fibonacci retracements help to show where a corrective move may end, and the 50% retracement seems like a very firm resistance level that would not be broken in the near term absent market chicanery. The 50% retracement is at $32,681. In fact, corrective retracements at every degree of trend (here the primary degree is shown) can retrace up to 61.8% or 78.6% of the prior wave. In this case, the prior wave could constitute the decline from the ATH to the November 2022 low, and the retracement could run all the way to $38,900 before failing and returning to lows. Wish more certainty could be provided, but these possibilities remain on the table.
But overall, the technicals remain highly uncertain. Price could tag the $25,000 resistance, move down to the magenta uptrend line and then return to tag some key level in the lower half of the massive trading range that formed BTC's topping pattern in 2021. When price action is this uncertain in an asset, it makes sense to step aside unless one is acquiring for a very long term hold (like a buy-and-hold investor or a "hodler"). Even buy-and-hold investors should incrementally scale into their investment (a key tactical strategy often noted by spy_master) with sound technical and fundamental arguments and invalidation levels too on larger time frames.
In the near term, price could easily move up to tag the resistance from the prior August 15, 2022 high, which may create a final, and more drastic divergence before a pullback. This seems a bit more likely, but again, don't rely on anyone's forecast, watch the price action and the levels if you can. To reiterate, that key level is just overhead, and lies at $25,200.
If that $25,200 level is broken above and held, then the .382 retracement—which coincides with the lower-edge of BTC's topping range—could easily be reached at $27,300-$28,032.
But before price can move any higher, it has to move over the teal-colored VWAP shown on the Primary Chart above. That has been a difficult level for BTC in the last couple weeks. BTC seems to be chopping above and below it. In the bulls favor (short term), that VWAP is flattening however.
The intermediate-term uptrend is defined by the magenta line on the Primary Chart above. A pullback to this line would actually be reasonable and healthy consolidation for bulls if this uptrend is to continue and actually attack the larger downtrend on weekly Ichimoku Charts or the downtrend as represented by the VWAP from the all-time high (dark blue at $30,000 today).
Finally, consider that major negative momentum divergences have appeared on the daily chart. This doesn't mean price will crash suddenly to new lows, but it does suggest the upward move is in its final stages right near major resistance levels. This could lead to a sharp pullback at a minimum to the uptrend line. Or it could break that uptrend line if enough fear and force allow. That should be watched closely. If the magenta uptrend line is broken decisively, watch out for a new low.
Hope this post helps provide new perspectives about what levels to watch in the coming weeks, and what price levels are important to consider.
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
One follower asked recently for an update on BTC. My last BTC post called for another push higher before going lower. A the time that was published, BTC traded in the upper 18000s and the downward TL (log scale) was just overhead. BTC then moved higher to the downtrend line, paused, and then broke above it. This coincided with major US equity indices and many other risk assets that broke above similar down TLs. This removes some of the certainty that an effective downtrend line provides, i.e., it contains price and provides a reasonable entry point for short positions in a downtrend and reasonable entry point for long positions in an uptrend.
For those who think the break of an uptrend is conclusive signal that price is returning to all-time highs, beware of the history of past bear markets in equities. This happened with SPX in 2000-2002. A chart of SPX from 2000-2002 is also included to show the break of the down TL that eventually failed.
Supplementary Chart A
SquishTrade does not assert that BTC will necessarily follow this pattern in SPX shown by a upside break of its major down TL in the 2000-2002 bear market. Rather, this example serves to illustrate why a trendline break alone isn't necessarily and all-clear signal or a trend-reversal signal on a larger time frame. It just takes away some of the certainty that had existed when that trendline effectively contained price below it, and reversed price every time it rallied to meet it.
Furthermore, a down trendline is not the only measure of a trend. Moving averages, Ichimoku Cloud and others perhaps capture the more flexible nature of a trend, and include a cushion (much like the wider cloud does within the Ichimoku system). Not every market participants market memory is at the same exact angled line. Using a weekly Ichimoku Chart, BTCUSD remains in a downtrend, characterized by the very wide cloud that is red colored (because the Senkou Span B line remains above the Senkou Span A line—bullish would be a green cloud where the SSA line is trending above the SSB line), and confirmed by price trending well below the cloud.
Supplementary Chart B (Ichimoku Cloud Weekly Chart)
The daily Ichimoku Cloud chart, however, looks quite bullish. Price has broken above the cloud, the cloud has turned green, and things look hopeful on this timeframe. So why is price stalling? Probably because major resistance lies overhead despite what shorter time frames suggest.
Another measure of trend includes VWAPs and long-term moving averages. The VWAP from the November 2021 all-time high lies around 30,000 today. The 50-week moving average, interestingly, lies right at the major resistance level shown by the blue rectangle sitting at mid-August 2022 highs. This 50-week MA (not shown) is at 25,040 today. The 100-week MA is even higher. These are important trend measures as well and lie overhead and slope downward.
Fibonacci retracements help to show where a corrective move may end, and the 50% retracement seems like a very firm resistance level that would not be broken in the near term absent market chicanery. The 50% retracement is at $32,681. In fact, corrective retracements at every degree of trend (here the primary degree is shown) can retrace up to 61.8% or 78.6% of the prior wave. In this case, the prior wave could constitute the decline from the ATH to the November 2022 low, and the retracement could run all the way to $38,900 before failing and returning to lows. Wish more certainty could be provided, but these possibilities remain on the table.
But overall, the technicals remain highly uncertain. Price could tag the $25,000 resistance, move down to the magenta uptrend line and then return to tag some key level in the lower half of the massive trading range that formed BTC's topping pattern in 2021. When price action is this uncertain in an asset, it makes sense to step aside unless one is acquiring for a very long term hold (like a buy-and-hold investor or a "hodler"). Even buy-and-hold investors should incrementally scale into their investment (a key tactical strategy often noted by spy_master) with sound technical and fundamental arguments and invalidation levels too on larger time frames.
In the near term, price could easily move up to tag the resistance from the prior August 15, 2022 high, which may create a final, and more drastic divergence before a pullback. This seems a bit more likely, but again, don't rely on anyone's forecast, watch the price action and the levels if you can. To reiterate, that key level is just overhead, and lies at $25,200.
If that $25,200 level is broken above and held, then the .382 retracement—which coincides with the lower-edge of BTC's topping range—could easily be reached at $27,300-$28,032.
But before price can move any higher, it has to move over the teal-colored VWAP shown on the Primary Chart above. That has been a difficult level for BTC in the last couple weeks. BTC seems to be chopping above and below it. In the bulls favor (short term), that VWAP is flattening however.
The intermediate-term uptrend is defined by the magenta line on the Primary Chart above. A pullback to this line would actually be reasonable and healthy consolidation for bulls if this uptrend is to continue and actually attack the larger downtrend on weekly Ichimoku Charts or the downtrend as represented by the VWAP from the all-time high (dark blue at $30,000 today).
Finally, consider that major negative momentum divergences have appeared on the daily chart. This doesn't mean price will crash suddenly to new lows, but it does suggest the upward move is in its final stages right near major resistance levels. This could lead to a sharp pullback at a minimum to the uptrend line. Or it could break that uptrend line if enough fear and force allow. That should be watched closely. If the magenta uptrend line is broken decisively, watch out for a new low.
Hope this post helps provide new perspectives about what levels to watch in the coming weeks, and what price levels are important to consider.
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
Note
This chart is the same as the Primary Chart at the start of this post. But instead of covering the whole topping range in a yellow rectangle, this chart shows it with a narrow rectangle along the bottom edge of that topping range, the most critical portion, which is where the ATH VWAP lies and two of the major retracements are within or nearby to this zone:Note
After several days of contending with its anchored VWAP from 2022 highs (March 2022 teal colored VWAP), BTC showed that this was an important level and got rejected from here initially. Now, it will be important to see where the week closes. In addition, BTC appears exhausted before even reaching $25,200, i.e., the mid-August 2022 peaks, a critical level of resistance in the near term.Note
BTC bulls will want to see the downtrend line from the all-time high hold as support. Bears will want to see this break. This is important technically. And given how devious equity and crypto markets have been the past year, don't be surprised to see trappy choppy action around the down TL. But keep an eye on that level. BTW, it's on a log chart:\
Note
Looks like BTC is working on a more distinct divergence—forming a higher high while momentum weakens and forms a much lower high. BTC has been diverging for a while, but it has not formed a *distinct higher peak) along with a dramatic divergence—until now. Instead, in the past weeks, BTC has trended slightly higher while it's momentum has waned and RSI or Stochastics have gently sloped downward as marginal new highs were made. Then BTC made a pullback, and now it's making a higher high for its current rally with a much lower momentum high in momentum indicators (e.g., Stochastics, RSI, etc.). RSI shown belowNote
On February 7, SquishTrade that BTC may likely tag the resistance from the prior August 15, 2022 high at 25K. That was tagged today. Below are excerpts from the original post—and the divergence issue remains relevant now:
"Price could tag the $25,000 resistance"
"In the near term, price could easily move up to tag the resistance from the prior August 15, 2022 high, which may create a final, and more drastic divergence before a pullback. This seems a bit more likely, but again, don't rely on anyone's forecast, watch the price action and the levels if you can. To reiterate, that key level is just overhead, and lies at $25,200."
Note
And here is the bearish divergence mentioned in yesterday's update complete with a reversal candle. This signals exhaustion and reversal of the shorter-term trend at a minimum. How price responds on the pullback (whether it will find support where it needs to for bulls or whether that will break) will be critical.Note
This post was originally published almost a month ago, and at the time, BTC had traded at $23,268. A month later on March 3, BTC is nearly at the same level, $22,300 - $23,200. BTC seems to be taking the scenic route now in early March just as it was in early February based on technicals and price action then. Most of the levels discussed in this post remain the same. Some have changed to a small degree as would be expected when the level is affected by new price and volume data, which cause a VWAP level, for example, to be fluid over time.
The weekly Ichimoku Cloud was given as another example of a more "flexible" gauge of trend than a mere straight trendline (see discussion above). Here is that chart updated:
This chart shows that the trend on this higher TF remains clearly down. But the possible price range remains quite wide. Support below lies around $20,374.50 and 20,911 where the Kijun Sen and Tenkan Sen lines are. But the cloud above remains quite thick and impenetrable for the time being. Based on Ichimoku on the weekly TF alone, price could rally quite a bit higher without breaking above the cloud. The top of the weekly cloud lies at 43K through early May 2023. Other lower levels of Ichimoku resistance are at $27,400 to $33,000, more likely reversal spots should BTC catch a bid in the coming two months.
Check out the uptrend line from BTC's November 2022 lows. It lies quite a ways below current price action. For the next month, this uptrend line of support ranges from $18,000 (early March) to $19,000 (early April). As mentioned, BTC has a wide price range to travel without giving a lot of clarity in the larger picture.
But the uptrend line from November 21, 2022 lows does show that an uptrend is underway in the intermediate term, i.e., a secondary trend for now. But the range of outcomes remains unpredictable. If you like to trade choppy ranges, trade from the edge (long or short) to gain an edge. And risk management is even more critical in this environment.
Note
Compare the daily Ichimoku chart with the weekly Ichimoku. The daily TF is shown below. Speaking of mixed signals and uncertainty—the daily and the weekly Ichimoku, placed side by side, show the uncertainty and mixed signals coming from the crypto space. Wonder why trades don't work so well the last few months? They never do when trends are not aligned and in conflict on various key TFs.The cloud shows firmer (and nearer) support than even the uptrend line mentioned above.
For the time being, price has broken below the blue Kijun line but founds support at the top of the green upward sloping cloud. But the strongest cloud support lies at the base of the cloud at $20,000 - $21,000. So a wide range of prices is possible in the coming weeks based on technicals alone.
Note
Price is still doing the "scenic route" path. BTC has traded pretty much sideways for a month, chopping up those with directional biases except for the very long-term holders and the short-term swing traders (who may have caught some nice moves within this chop). The resistance overhead at mid-August 2022 peaks ($25,200 or so) shown on the Primary Chart as a rectangle has held firm and remains the level to break for now for those seeking upside. With yield curves being in record inversion territory this week (esp. the 2s/10s), it's important to consider how BTC may respond to an economic recession in the coming months. This may limit any further upside to the major resistance levels discussed above.
Note
As BTC approaches 28K, here is an update on BTC in several charts:1. BTC broke above a very important level of resistance that goes back to the breakdown in May 2022.
2. BTC is rapidly approaching the most important VWAP of all—the VWAP anchored to the ATH. This VWAP has not been touched since April 2022, approximately 1 year ago:
3. During the pullback during the first 10 days of March 2023, BTC successfully retested its down TL from the all-time high (on a log chart) and this retest coincided with BTC's retest of its VWAP from its intermediate-term Nov. 21, 2022 low (light blue). The teal-blue circle highlights this area of confluence that held as support several days ago:
4. Finally, BTC is rapidly approaching one of the most significant resistance zones above. This is the blue-bordered yellow rectangle shown at the lows made during its entire 2020-2022 topping pattern, which is a zone from 28,000 to 32,000:
Note
5. One more chart that should be considered is the Ichimoku Cloud on the weekly TF. Notice how BTC is just now meeting the red, wide downward-sloping cloud just as it is meeting important resistance (yellow rectangle in number 4 above). This cloud can provide a wide layer of resistance wall the way up to 43K, where the top of the cloud lies—not saying BTC gets there, but just pointing out how wide the cloud is as an Ichimoku resistance zone:Note
In the original post from February 7, 2023, SquishTrade hypothesized as follows:"If that $25,200 level is broken above and held, then the .382 retracement—which coincides with the lower-edge of BTC's topping range—could easily be reached at $27,300-$28,032."
The $25,200 level has been broken on a daily candle. And within a day or two of that break and close above, price has reached the next target zone of $27,300-$28,032.
Bulls (short term) will want to see this week's candle close above 25K as well. And bulls will want to see that this candle is not negated by next week's candle either by a two-candle reversal pattern.
Finally, the original post on Feb. 7, 2023, explained the likelihood of BTC taking the scenic route, and it largely did so, chopping sideways for about 5-6 weeks, making little progress upward, but chopping downward toward the uptrend line from lows without quite reaching it. The primary chart also noted that it would not be unreasonable for BTC to retest the topping pattern at 28K-30K (lower edge of the large yellow box on the primary chart). This retest is happening this week finally. It's possible that price can keep pushing higher on this move. Next target looks like $30-32K, which can likely be achieved within days to weeks.
Note
Update on the weekly Ichimoku Cloud, covered in the original post as well as some of the prior updates. The cloud on the weekly chart continues to slow the momentum of this massive move. But then again, only a massive move would have taken price up to that cloud as price had dropped far below it on the weakness seen from 11/2021 to 11/2022Note
And price stalled right at the center of the resistance zone at the lower edge of the topping pattern (discussed in the main post above). The anchored VWAP from BTC's all-time high is also causing problems, and it's right in the area where BTC's weekly Ichimoku cloud resides.Anchored VWAP from the ATH shown at 29,426 on this chart:
Note
On the primary chart, click the refresh button. Price continues to stall right at the base of the massive topping range described. Three weekly doji candles side by side appear since the tall green candle that ran right into this level. As discussed in the prior updates, this coincides with the anchored VWAP from the all-time high which has not yet been overcome. The supply from this 1.5-years-long topping range is likely enormous. Essentially nothing has changed since the next most previous update on March 25, 2023.Here is an updated chart though with the all-time high VWAP as well as some longer-term Fib levels. The main thing to see is the coincidence of the all-time high VWAP near 29K with the lower boundary of the 1.5-year topping range, and how price has for 4 weeks stalled at this level.
Note
After forming quite a few smaller divergences on the initial move up to resistance (at the lower edge of the 2020-2021 topping range), BTC pulled back in early March only to make another push higher. The smaller divergences (clustered closely together rather than further apart) likely warned of that consolidative but sharp pullback in March.But the ensuing push higher created a wider and more significant bearish divergence in RSI vs. price. The chart below shows this. Also notice the prior update from today showing doji candles on the weekly TF right at the base of the important range. This appears to be a retest of the topping range / pattern that was broken to the downside in mid-2022. This is critical. If this retest fails, then from a technical perspective, new lows could be in store. This needs to be analyzed more thoroughly in the coming weeks, but if 29-33K cannot be broken decisively, i.e., several weekly closes above, bulls may be unpleasantly surprised.
Note
Lastly, the weekly Ichimoku Cloud helps reveal a more "flexible" and dynamic trend measure with a cushion reflecting the variety of market memories for levels / supply. Unsurprisingly, the weekly Cloud is wide and red with resistance largely aligned with the levels discussed using other technical methods above. Ichimoku resistance = 29K - 33K
Ichimoku support = 19K - 22K
This is similar to the two key VWAPs shown in the other updates from today. The Nov. 2022 VWAP is at 21.5K (support) and the ATH VWAP at 29.4K, while the topping range is around 28-32K.
SquishTrade
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.