When I said that there were signs of weakness showing in the BTC chart last Monday, I thought that was a pretty reasonable take but didn’t necessarily think price would nuke practically right after I finished writing my post. Nonetheless that’s what happened and I was happy to at least be thinking in the right direction. I’m a Bitcoin bull when it comes down to it and it’s not easy to set my bias aside, but that’s exactly why I use technical analysis in my trading. When properly applied, these tools really help to remove emotional bias and opinion. Emotions were running high for the crypto community as BTC broke to a new all time high, but the charts were telling me to not get too excited. Hopefully it was conveyed in my writing that I hadn’t flipped bearish, but that I thought the breakout was weak and not a place to entertain new longs. Anybody who put a long on last Monday clearly got run over. For the bears, I think the sharks could’ve zoomed into a lower time frame and found short opportunities, but I don’t think the 68k area was that great of a selling location for long term investors. That said, a fair bit of technical damage has been done in this dump and there’s a lot of cleaning up to do before the bulls can resume.
Full Chart Image: https://www.tradingview.com/x/JMSjapDR
The damage I’m seeing:
- Daily M Top – although kind of ugly with a low right leg
- Bearish moving average cross – now widening and trending down
- Break of last week’s range low
- Confirmed bearish OBV divergence
- Bearish volume waking up during dump
- Confirmed bearish MACD double divergence
- Confirmed RSI Bearish Divergence and loss of 50 line
Who knows, maybe that was the top and the party’s over, we certainly won’t know until after the fact. But from a daily chart longer term perspective, I still think it’s too early to throw the towel in on this bull cycle and instead look at this as a cleaning up period after the last straight run up that happened in October. I don’t think the down move has resolved just yet. Last week’s range did not hold and now there’s quite a lot of open air below with the 200 period moving average all the way down at $46k. I like the $53k September high for potential support and my current thinking is we bottom somewhere around there. I need to see divergences coming in and a double bottom in price before I can consider the bull back on. No one knows how far down we have to go but it seems there is strong buying sentiment around $53-$54k so maybe we don’t even dip that low. But for me to see bullish divergence in my indicators price needs to break the current low at $55,625 so I’m thinking there will be at least one more move down. I’ll be watching closely and we’ll see where we end up next Monday.
Be sure to watch my short video explaining this post in a little more detail.
Happy trading!
