Topic: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion - page 13738. (Read 26713396 times)

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Technical Analysis

Bitcoin price structure has remained in consolidation purgatory since cooling off from a meteoric rise near the end of 2017. Periods of ranging, indecisive price action are critical for the market to regain momentum for a move in either direction. A key hallmark for this is a descending volume profile, which has been the case since the low set in February.

Although consolidation within a trend should always be assumed as trend continuation, casting a wide net with analysis, while avoiding analysis paralysis, and mapping out several scenarios is the key to eliminating surprises. Predicting the exact future price is less important than reacting to the price action with a potential trajectory and predetermined target.

This process can be done with Chart Patterns, Ichimoku Cloud, Moving Averages, Pitchforks, and historic macro trends. Further background information on the technical analysis discussed below can be found here.

A symmetrical triangle has formed as price has consolidated, making lower highs and higher lows. In Technical Analysis of Stock Trends (1948), Edwards and Magee suggest that roughly 75% of these triangles lead to a continuation of the trend, while the rest mark reversals. In any case, this pattern will be a ‘trade the breakout’ situation as it will likely lead to weeks of trend follow through. Breakouts post consolidation typically occur after at least 66% of the triangle has completed (yellow highlight).

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Inverted patterns are typically seen at the top or markets, not after a downward move. While this makes the probability of the pattern becoming a reality less likely, it does not mean that it cannot happen. An inverted Head and Shoulders appeared on the weekly Oil chart after a significant downward move as well, which reached it’s 1.618 fib extension almost exactly on target.

If this inverted Adam and Eve is real, it yields a price projection of ~US$2,900 and US$4,600 based on the measured move and 1.618 fib extension. The measured move target nearly matches the low set in September, as well as the previous resistance throughout June and August.

Bitcoin Price Analysis 31 May 2018 14Bollinger Bands, a measure of price volatility, have also coiled tighter and tighter, as illustrated by the Bollinger Band Width (BBW) indicator. An oscillator similar to RSI, %B, which shows the depth of price relative to the Bands, shows a growing bullish divergence as price dips lower without further expansion of the Bands themselves.

Bitcoin Price Analysis 31 May 2018 15The Ichimoku Cloud uses four metrics; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, and the Lagging Span. The best entry always occurs when most of the signals flip from bearish to bullish, or vice versa.

The Cloud metrics on the weekly time frame are; price above Cloud, nearly bearish Cloud, newly bearish TK cross, and Lagging Span in price and above Cloud. Together, these signals suggest the trend is neutral but leaning weakly bullish because price remains above Cloud. This is the first TK cross since 2015, while the previous bearish TK cross in a similar position led to a multi-month downtrend. TK crosses on high timeframes are significant and should be seen a long exit signal for trade entries which began in 2015.

Price itself is below the Kijun and, seemingly, in no-man’s land. A long entry would not be warranted until price is above the Kijun with a bullish TK cross, essentially also above the neckline of the head and shoulders chart pattern.

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Conclusion

For better or worse, economic and trade policies worldwide have begun to dramatically shift with multiple political uncertainties. Bitcoin, and cryptocurrencies broadly, have more recently represented a global futures market to price-in credit risk or lack of confidence in leadership. CNBC recently discussed Bitcoin as a fear gauge for the market, similar to the volatility index.

Technicals are the most bearish they have been in months. Based on the current price structure, breaking up would be much more surprising than breaking down. Admittedly, trend-based indicators like the Cloud become more noisy with non-trending price action, and therefore less reliable for actionable signals. However, even when zooming out on the price action, many of the technicals remain bearish. Currently, the trend indicator to watch is the 50/200EMA on the two day timeframe.

Although too early to determine, one ray of hope would be the possibility of this entire consolidation period representing re-accumulation. Essentially, the entire bull trend from 2015 has been reset, which gives plenty of fuel for a new all time high just as easily as returning to new lows. The direction may be unclear, but the volume-based momentum will be obvious.