Market Commentary (BTC):
After a relatively stable long holiday weekend which saw price bounce off of support at 355 $ on the way up to 390 $, bitcoin is now consolidating once again in the 375 to 380 $ area. As we see it, there are two opposing forces in the market this week which could keep both bulls and bears from venturing too far: 1.) Bitcoin Black Friday merchant selling is most likely going to continue for at least a couple of days + typical end of month selling will create pressure to the downside, and 2.) New money Monday + bullish price action and overly negative sentiment should keep prices elevated for now.
Market Analysis (BTC/USD):
Weekly Log Chart: We return to the weekly log chart for the long term view of the bitcoin price. The continuation of the compression off of the 1163 $ high is in full effect as the extended consolidation has yet to fully run its course. At this time the compression is being caused by a convergence of technical levels and indicator readings, as well as an existential debate that bitcoin hasn’t seen for years. We find these developments to be healthy in the context of an extended bull market seeing as though they give the market time to digest a parabolic move, create a strong foundation for the next rally, and wash out weak hands that are only in for a “quick buck”.
Returning to the chart, the downtrend line off of the ATH is obvious, although it is becoming more and more uncertain whether this trendline can last through the end of the year. This is especially true given it is squeezing prices down to the 78.6% Fibonacci level (OTE long sweet spot), which does not seem to want to break lower at the moment.
The indicators are also telling us that an eventual breakout is more likely than a breakdown due to a oversold Willy, a bullishly divergent MACD, and OBV that has double bottomed on the previous selloff. Pair this with a 100day MA that refuses to be broken, and we think the sideways action will persist but will not be broken lower. No telling when a terminal trend move will occur, but we will be watching closely…
BTC/USD weekly log chart
4hour Chart: Last week we showed the daily chart for the medium term setup, however this week we want to focus-in more, therefore we present the 4hour bar chart today. No surprise that price is staying comfortably within the 360 $ to 380 $ range given that this is the volume profile PoC region, is where the MA’s and Ichimoku Cloud are converging, and the 61.8% Fib level is dead in the middle of this range. Also of note is the fact that the downtrend lines off of the 453 $ high keeps getting broken to the upside but with very little follow-through.
The indicators are mixed, at best, on this timeframe as MACD broke the zeroline but with no conviction whatsoever, Willy is heading back to overbought territory quickly, and OBV has flatlined.
While we think an inverse head and shoulders could be in the making, it is still too early to tell if this will materialize. Regardless, the key support levels to watch this week are 358 $, 334 $, and 320 $, with resistance coming in overhead at 386 $, 395 $, and 415 $.
BTC/USD 4hour chart
Getting to the educational portion of our report today, we want to focus on what we consider some of the most relevant and actionable technical indicators in existence: Moving Averages (MA’s). These are simply mathematical calculations that average together all printed prices within a given time period and presents them as lines on a chart (you can see them in the above 4hour chart delineated in blue and light blue).
They are used as an analytical component in almost any TA system due to the fact that they are essentially the most pure measurement of momentum. They are used in three main ways. The first is simply as support and resistance levels. If price is below an important MA and is rallying, then price will most likely encounter some push back at the MA. Vice verse, if a critical MA is below the market price and prices are moving lower, then price will find support at that level in a selloff.
Second, MA’s are used in trend analysis. During strong trends in either direction, the major MA’s should follow the market with no breaches (confirms trend). Lastly, but somewhat related to the second, is the use of crossovers. This is a relational reading that occurs when a shorter term MA crosses above or below a longer term MA, creating what are typically referred to as a “Golden Cross” and “Death Cross”, respectively. The most common MA’s are the 50, 100, and 200 day MA’s.
Also, keep in mind that there are EMA’s as well (exponential moving averages), which are more effective given a short term timeframe. These are better for catching scalps than swings, and some common ones are the 8, 19, and 26 day EMA’s.
That’s all for this week! Cheers!
Happy trading! Have a great BITday!
Disclaimer: Please always do your own due diligence, and consult your financial advisor. Author owns and trades bitcoins and other financial markets mentioned in this communication. We never provide actual trading recommendations. Trading remains at your own risk. Never invest unless you can afford to lose your entire investment. Please read our full terms of service and disclaimer at https://bullbearanalytics.com/terms/.