Bitcoin: Is the bottom in?
Bitcoin has been on quite a ride since my last post. We reached my low 7000s target area and had a huge bounce from there, pushed along by liquidation cascades, but there was no follow through and the entire move has retraced and made a new low. As I alluded to last time I believe falling below $7000 is a very bad sign unless it is just a wick and thankfully for the bulls, that is what the current $6500 low is. Bitcoin is now consolidating in the key low 7000s support zone as we wait for the next major move.
The weekly chart shows a clear downtrend, all lower highs and lower lows since the top in June. Now bitcoin hovers perilously around the major support provided by the 50/100 week moving averages and the .618 fib level. Below this is really open air all the way down to the low 5000s consolidation zone from April, combined with the .786 fib and the never before broken 200 week moving average. If we break below $7000 again, this zone is my next target. On the flip side, I would be confident the bottom is in if bitcoin can break the latest high around 10k.
Zooming out further and overlaying fib levels from both the 2018 bear market and 2019s bull run gives very clean support/resistance zones which have all been well respected on a weekly closing basis, with one such zone also acting as the current support. With all the activity around 6k last year there is no doubt a large volume profile cluster in that region however it gave no resistance on the way up this year and I would expect the same on the way down.
The daily chart looks very bearish, clear downtrend, not a single rally for months that has managed to sustain more than a few days. The moving averages are all trending down with price below them. The selloff throughout November was parabolic and certainly looks like capitulation, but was it the final capitulation? The bounce off the bottom is a good sign but not unexpected after such a powerful move, now we are wrestling with the support turned resistance around $7500. The higher low at $7100 is also positive and is the level that bulls really need to hold from here.
The current consolidation. Not the cleanest triangle but potentially tradable on a breakout early next week. A break down would really look like this is a bear pennant and continuation to the downside and new lows. A break up and I would be looking for $7800 where it either begins to look like an ascending triangle or makes the first higher high in a long time, good for the bulls.
OBV shows clear bullish divergence at the bottom as it did in late October before the big move up and is looking very strong hinting at heavy accumulation at these levels.
Bitmex funding rates are negative which based on history indicates the next major move will be up. This indicator has been accurate pretty much every single time this year as the market seems almost entirely driven by traders towards the path of most liquidations.
So is the bottom in? I am about 60/40 in favour that it is, but am prepared to trade whichever direction it moves. In the shorter term I will be looking to long a breakout above $7800 but cautious of all the overhead resistance to come. Signs are there of accumulation and everyone looking to build their position expecting a large pre halvening pump, maximum pain could well be a move up into the high 8k - low 9ks followed by continuation down to new lows. Reclaiming 10k (properly, not on a huge short squeeze wick) and its full bull market ahead. Short trades are simpler, break below $7000 and I am looking for $5500 minimum.
The weekly chart shows a clear downtrend, all lower highs and lower lows since the top in June. Now bitcoin hovers perilously around the major support provided by the 50/100 week moving averages and the .618 fib level. Below this is really open air all the way down to the low 5000s consolidation zone from April, combined with the .786 fib and the never before broken 200 week moving average. If we break below $7000 again, this zone is my next target. On the flip side, I would be confident the bottom is in if bitcoin can break the latest high around 10k.
Zooming out further and overlaying fib levels from both the 2018 bear market and 2019s bull run gives very clean support/resistance zones which have all been well respected on a weekly closing basis, with one such zone also acting as the current support. With all the activity around 6k last year there is no doubt a large volume profile cluster in that region however it gave no resistance on the way up this year and I would expect the same on the way down.
The daily chart looks very bearish, clear downtrend, not a single rally for months that has managed to sustain more than a few days. The moving averages are all trending down with price below them. The selloff throughout November was parabolic and certainly looks like capitulation, but was it the final capitulation? The bounce off the bottom is a good sign but not unexpected after such a powerful move, now we are wrestling with the support turned resistance around $7500. The higher low at $7100 is also positive and is the level that bulls really need to hold from here.
The current consolidation. Not the cleanest triangle but potentially tradable on a breakout early next week. A break down would really look like this is a bear pennant and continuation to the downside and new lows. A break up and I would be looking for $7800 where it either begins to look like an ascending triangle or makes the first higher high in a long time, good for the bulls.
OBV shows clear bullish divergence at the bottom as it did in late October before the big move up and is looking very strong hinting at heavy accumulation at these levels.
Bitmex funding rates are negative which based on history indicates the next major move will be up. This indicator has been accurate pretty much every single time this year as the market seems almost entirely driven by traders towards the path of most liquidations.
So is the bottom in? I am about 60/40 in favour that it is, but am prepared to trade whichever direction it moves. In the shorter term I will be looking to long a breakout above $7800 but cautious of all the overhead resistance to come. Signs are there of accumulation and everyone looking to build their position expecting a large pre halvening pump, maximum pain could well be a move up into the high 8k - low 9ks followed by continuation down to new lows. Reclaiming 10k (properly, not on a huge short squeeze wick) and its full bull market ahead. Short trades are simpler, break below $7000 and I am looking for $5500 minimum.
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