Bitcoin: The Untold Truth about Technical Analysis (Aug. 01)

31 ก.ค. 2020

X Force Global Analysis:


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In this analysis, we not only explore Bitcoin's 4H chart (on the far right), but also share an important fact about Technical Analysis that most people overlook.

Analysis

- In the past, we have seen Bitcoin form bearish divergences on the 4H and daily charts.
- A textbook bearish divergence is when prices form higher highs, while indicators (such as the Relative Strength Index) form lower highs, showing a diverging pattern
- While this is typically a sign of a bearish reversal, that is not always the case
- Trading based on technical analysis is all about understanding probabilities. Not many people understand that certainties in the market don't exist.
- When a bearish divergence is formed, it merely means that a bearish reversal is "highly probable".
- As such, it's important to understand an asset's past price history in order to have a better understanding of the probable outcomes of the market
- For instance, through two proven cases, it has been identified that bearish divergences that are formed during strong bull markets can be negated easily
- The divergence plays out only to a minimal degree (or does not play out at all), as Bitcoin continues its rally

Market Sentiment:

Long short ratios are at 70 to 30, with increased long positions in the market. As support held, bulls have regained their confidence in the market.

What We Believe

Again, trading based on technical analysis is all about understanding probabilities. While a bearish trend reversal is probable during normal bearish divergence formations, historical data has proven that bearish divergences formed during strong uptrends tend to have minimal effect on the market, and if anything, become good points of entry for dollar cost averaging in order to maximize one's position. We expect Bitcoin to rally further to new highs for this year.

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Trade Safe.