BTC: Bulls Have Only Taken a Pawn from Bears
Updated
Primary Chart: Daily Logarithmic Chart with Anchored VWAPs, Fibonacci Levels, and Trendlines
BTC bulls seem ecstatic today after BTC broke above an intermediate-term trendline (shown in red on the Primary Chart). While this breakout could retest (or whipsaw), the likely result is that it could be a short-term positive, leading to one of two price paths in the very short term: (1) more sideways action, or (2) more another rally attempt.
But calling this a major trend reversal is misleading. It's as though bulls are calling "checkmate" when they have merely taken a pawn from the bears after bears have taken several key chess players (a couple knights and a rook and four pawns since the all-time high).
Of course, it could be the start of a major trend reversal—no one knows the future, and nothing is ever guaranteed in markets. But with inflation remaining sticky and failing to cool, with central banks remaining aggressive and hawkish, with the money supply tightening, and interest rates remaining elevated across the curve, does this look like a time when risk assets are set to run to all-time highs again? Common sense says that this is a bear rally just as with equity indices. Sure, bear rallies should be respected, perhaps even traded. They should not be shorted blindly until confirmation is given of exhaustion and reversal lower.
The irrationality of markets is analogous to July 2022, when the Fed chair spoke at the presser and market participants misinterpreted the message as a "pivot" only to find out later in August 2022 at the Fed's speech at Jackson Hole that they were badly mistaken. Even if a 50 bps rate hike occurs in December 2022, this should not be viewed as a pivot. It's a slowing of increases in the benchmark rate—not only are rates being held high, they are continuing higher albeit at a less rapid pace. And there is no guarantee that the work already done will quickly bring inflation back towards the 2% target of the US central bank.
Yes, a minor DT line from May 2022 was taken out today. It's like a pawn on the chessboard. But there are still many bearish knights, bishops and rooks remaining.
A few of the resistance levels above this down TL are shown on the chart. All of them cannot be identified without confusion. But it shouldn't be a surprise if a few more key resistance levels are taken out as price goes higher in the short-term. At some point in the coming months, the higher likelihood is that price will exhaust and the larger trend structure that remains valid should turn price lower again.
Here are a few of the levels that lie overhead with which price must content despite breaking a minor down TL today:
1. VWAP from June low = 20,738 (purple)
2. the .50 R of the recent decline = 21,684
3. the .618 R of the recent decline = 22,516
4. long-term Fibonacci level (.382 R) = 22,911
5. the .786 R of the recent decline = 23,702
6. VWAP from 3/29 = 25,708 (teal)
7. Major resistance / supply zone = 25,000 - 26,000
8. Major downward trendline from all-time highs (orange) = $26,500 (and decreasing as each day passes given its slope)
9. VWAP from the all-time high (red) = 33,500 (and decreasing as well)
Please also check out this analysis from a few days ago discussing the rally and identifying many of the same resistance levels mentioned in this post.
________________________________________
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.
BTC bulls seem ecstatic today after BTC broke above an intermediate-term trendline (shown in red on the Primary Chart). While this breakout could retest (or whipsaw), the likely result is that it could be a short-term positive, leading to one of two price paths in the very short term: (1) more sideways action, or (2) more another rally attempt.
But calling this a major trend reversal is misleading. It's as though bulls are calling "checkmate" when they have merely taken a pawn from the bears after bears have taken several key chess players (a couple knights and a rook and four pawns since the all-time high).
Of course, it could be the start of a major trend reversal—no one knows the future, and nothing is ever guaranteed in markets. But with inflation remaining sticky and failing to cool, with central banks remaining aggressive and hawkish, with the money supply tightening, and interest rates remaining elevated across the curve, does this look like a time when risk assets are set to run to all-time highs again? Common sense says that this is a bear rally just as with equity indices. Sure, bear rallies should be respected, perhaps even traded. They should not be shorted blindly until confirmation is given of exhaustion and reversal lower.
The irrationality of markets is analogous to July 2022, when the Fed chair spoke at the presser and market participants misinterpreted the message as a "pivot" only to find out later in August 2022 at the Fed's speech at Jackson Hole that they were badly mistaken. Even if a 50 bps rate hike occurs in December 2022, this should not be viewed as a pivot. It's a slowing of increases in the benchmark rate—not only are rates being held high, they are continuing higher albeit at a less rapid pace. And there is no guarantee that the work already done will quickly bring inflation back towards the 2% target of the US central bank.
Yes, a minor DT line from May 2022 was taken out today. It's like a pawn on the chessboard. But there are still many bearish knights, bishops and rooks remaining.
A few of the resistance levels above this down TL are shown on the chart. All of them cannot be identified without confusion. But it shouldn't be a surprise if a few more key resistance levels are taken out as price goes higher in the short-term. At some point in the coming months, the higher likelihood is that price will exhaust and the larger trend structure that remains valid should turn price lower again.
Here are a few of the levels that lie overhead with which price must content despite breaking a minor down TL today:
1. VWAP from June low = 20,738 (purple)
2. the .50 R of the recent decline = 21,684
3. the .618 R of the recent decline = 22,516
4. long-term Fibonacci level (.382 R) = 22,911
5. the .786 R of the recent decline = 23,702
6. VWAP from 3/29 = 25,708 (teal)
7. Major resistance / supply zone = 25,000 - 26,000
8. Major downward trendline from all-time highs (orange) = $26,500 (and decreasing as each day passes given its slope)
9. VWAP from the all-time high (red) = 33,500 (and decreasing as well)
Please also check out this analysis from a few days ago discussing the rally and identifying many of the same resistance levels mentioned in this post.
________________________________________
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
Correction: the TL that was broken today is orange, not red.Note
Bulls may have just taken another couple pawns today (we'll see where BTC closes). In this case, BTC reclaimed the VWAP anchored to the June low at 20,738. As mentioned in this post, it's wise not to short bear rallies until they show signs (usually on LTFs first) of exhaustion and reversal back down.Watching DXY -- when it shows its corrective pullback is complete, that could reasonably be the time when indices and cryptos falter.
Note
Bulls have now lost the June 2022 VWAP that had been reclaimed intraday. It seems taking the next pawn isn't so easy, bears are hanging in there. We'll see what happens next several days. Note
BTC cannot seem to break above the VWAP anchored to YTD lows in mid-June (shown in purple). Note
Price seems to be fixated around this VWAP from YTD lows in June 2022. Struggling to get above it, and when it does rise above, it doesn't move quickly off the level, it just sits there. Based on what is happening in equity markets, upward pressure (with consolidative pullbacks) could continue into November OPEX -- November18, 2022.
Note
BTC remains stuck below the June 2022 VWAP from YTD lows after a couple of weak rallies that couldn't push and hold above21K. With a -3.43% decline in the Nasdaq 100, it will be interesting to see whether BTC continues to chop sideways or whether it can begin establishing a directional trend again.Note
After a brief break above the June 2022 VWAP (now June lows are no longer the YTD low as a new low was made today), BTC failed back below it. This is a failed breakout, which is bearish. Lows in June were briefly undercut in an intraday failed breakdown. We'll see what happens next. But SquishTrade overall remains bearish.
It took a few weeks, but BTC finally got rejected at one of the numerous resistance levels above.
And it has fallen back below the anchored VWAP from the prior low in June, which has now been undercut today.
Trade closed: target reached
The main idea here was that BTC's violation of a shorter-term downward TL was only part of a bear rally, only a minor short-term positive that did *not* effect a major trend reversal of the broader bear structure. The massive price decline this week showed that the bear market is still in alive and well in BTC and other cryptos, so this post will be closed as a success.
For those interested, below are copied some of the key comments from the original post from October 25. Sometimes we get it right and it's encouraging! Other times we don't . . . Such is the life of trading and technicals.
"BTC bulls seem ecstatic today after BTC broke above an intermediate-term TL (shown in orange on the Primary Chart). . . . "
"But calling this a major trend reversal is misleading. It's as though bulls are calling checkmate when they have merely taken a pawn from the bears after bears have taken several key chess players (a couple knights and a rook and four pawns since the all-time high)."
"Of course, it could be the start of a major trend reversal—no one knows the future . . . . But with inflation remaining sticky and failing to cool, with central banks remaining aggressive and hawkish, with the money supply tightening, and interest rates remaining elevated across the curve, does this look like a time when risk assets are set to run to all-time highs again? Common sense says that this is a bear rally just as with equity indices. Sure, bear rallies should be respected, perhaps even traded. They should not be shorted blindly until confirmation is given of exhaustion and reversal lower."
"Yes, a minor DT line from May 2022 was taken out today. It's like a pawn on the chessboard. But there are still many bearish knights, bishops and rooks remaining."
"At some point in the coming months, the higher likelihood is that price will exhaust and the larger trend structure that remains valid should turn price lower again."
In summary, BTC's price this week ended up failing at two of the key resistance levels identified at the lower end of the major resistance range given.
1. VWAP from June low = 20,738 (purple)
2. the .50 R of the recent decline = 21,684
3. the .618 R of the recent decline = 22,516
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