Bitcoin Price Analysis: Bears in Great Position on BTC/USD Charts
Let’s go ahead and take a look at what’s going on with Bitcoin at this present moment in time.
If you remember, there was a major drop in the price over the last 48 hours.
This is following the significant volatility that we saw from Bitcoin a few hours when the price oscillated from $9k down to $7.9k in the same day before finally settling around the $8.3k mark.
Bitcoin Price Analysis
In the picture above we can see the price clearly leaning against the support line that was inked out.
This diagonal support goes all the way back to April, so its actually pretty reliable, all things considered.
Toward the latter part of this trend, we can see how there was a bull pennant formation that did have a successful breakout, before reaching its peak around $8.8k-$9k.
Since then, the price has fallen abruptly down to the $7.8k range.
If the price continues to head toward the underlying support, then $7.3k is definitely in the picture:
Baby Double Top Formation
The charts above do not necessarily show a “strong” double-top formation. However, this does not preclude the fact that it does appear that Bitcoin failed to break past the $8.8k-$9k resistance twice. So we’ll make sure to mark and note this for future purposes.
The neckline of this ‘baby double top’ is at $8k.
So conventional trading wisdom suggests that the completion of this pattern would end around the $7,000 mark (top-neckline = X ; neckline-X=Target).
However, this is a bit below where we saw our diagonal support line set up at.
What’s notable here is that the EMA-50 actually coincides with the intended target for our ‘baby double top’ chart formation.
Let’s move forward.
Relative Strength Index(14)
From what can be seen on the daily resolution, the RSI(14) is showing extreme sell pressure.
Check it out below:
From what we can see above, as the RSI(14) continues to tunnel downward, there is a clear trend of decreasing price momentum.
This means that sell pressure is still increasing. This does not necessarily correlate with a decrease in price, but this indicator is something that we do want to keep in mind.
Balance of Power RSI
In the chart above, we have the Balance of Power RSI. This indicator is another metric that helps us assess buy or sell pressure on the asset it is applied to.
In this case, as the BoP indicator continues to plummet, its color has turned red.
This indicates that there is extreme sell pressure on the asset (Bitcoin).
This does not mean that there will be an impending reversal in the pressure (i.e., the idea that an extreme precludes a reversal), but rather that there is simply heavy sell pressure that is outside of the expected range of values that Bitcoin has experienced.
When reading the indicator above, the only logical interpretation to make is that there is heavy sell pressure. Thus, entering a long position after seeing the metrics of this indicator would be an extremely counter-intuitive and illogical move.
MACD Below Histogram
The MACD has finally dropped below the Histogram.
Few know this, but the MACD is essentially akin to the RSI and other momentum indicators in the way that there is an ‘upper bound’ and ‘lower bound’ for “normal” values.
The Histogram is the ‘zero line’. When the MACD crosses below this line, we can officially say that the indicator is showing us increasing sell pressure and vice versa as it crosses above this point.
Thus, even if we see convergence on the MACD indicator, we must take its placement into account.
Again, this serves as another very bearish indicator (not a forecaster though).
There is nothing thus far on the daily resolution charts for Bitcoin that indicates that Bitcoin is due for a bounce back of any sort.
That does not mean that one will not happen, but if it does, then it will be spontaneous in nature and not due to something in the underlying technicals that foreshadowed such a reversal.
None of the indicators presented (among others that were not presented in this piece) have shown any level of divergence that would justify a long position either.
At this point, traders have two choices:
A) Ride out the price action under the assumption that Bitcoin will continue its course.
B) Place a short position with a reasonable S/L and adjust as more data about the price action is accumulated in the coming days and months.