Shaurya Malwa · 9 hours ago · 2 min read · Insights via ConsenSys
News › Bitcoin › Technical Analysis
Bitcoin long-term trend still looks bullish, short-term not so much
Disclaimer: This article contains technical analysis, which is a methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. The content presented in this article is the opinion of the author. None of the information you read on CryptoSlate should be taken as investment advice. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own diligence and consult with a financial advisor before making any investment decisions.
Bitcoin’s exponential growth lead 40-year trading veteran Peter Brandt to (famously) believe BTC entered a new “parabolic phase.” From its December low of $3,150 BTC could aim for a new high of $100,000, Brandt suggested. However, in the short-term, the technicals do not look so rosey.
Bitcoin takes aim at $100,000 target. $btcusd is experiencing its fourth parabolic phase dating back to 2010. No other market in my 45 years of trading has gone parabolic on a log chart in this manner. Bitcoin is a market like no other. pic.twitter.com/wE4j3riMgI
— Peter Brandt (@PeterLBrandt) June 22, 2019
The “parabolic advance” has been so significant that most of the technical bearish signs seen on different timeframes have been invalidated allowing the uptrend to continue, even getting the former notoriously stubborn bear, JP Morgan Chase VP Tone Vays, to become officially bullish.
Trading #Bitcoin – My 15 Years of TA experience tells me that you need 3 steps for Trend Change. Establish a Swing High, Followed by a 30%+ Correction (based on $BTC's volatility hist) than challenge set high. So here we are:https://t.co/XL4fQnnxj5
— Tone Vays [#UnderstandBit] (@ToneVays) July 10, 2019
Despite the outgrowing positive sentiment that can be perceived in the market and the short-lived pullbacks, there are still some patterns hinting that Bitcoin could be due for more major corrections.
Bitcoin technical analysis
In the long-term, everything seems to point out that the bull market has started and Bitcoin is on its way to new all-time highs, as Peter Brandt explained.
The moving average convergence divergence (MACD) that, which is commonly used to follow the path of a trend and calculate its momentum, recently had a bullish cross between the 12-month exponential moving average and the 26-month exponential moving average, which is a strong positive signal.
Such a formation has only occurred twice on the 1-month chart since Bitcoin was released. The first time happened around June 2010, which took BTC through a 22.6x upswing from $5 to $214, and the second one developed in December 2015 and saw it surge 5.6x percent from $350 to $19,770.
The Parabolic SAR, which is displayed as a series of dots that helps identify potential reversals in the price movement of an asset to determine the direction of the trend, also gave a bullish signal—positioning itself below the price of BTC last month. The last time the Parabolic SAR signaled a trend change from bearish to bullish was in June 2016 and was followed by a 3,700 percent rally that ended in the all-time high of December 2017.
Along the same lines, the TD Sequential Indicator is currently on a green five candlestick suggesting that BTC has the potential to continue going up for another four months before a sell signal is given in the form of a green nine candlestick.
As the upward movement continues to unfold, it seems like nothing can stop it, just like it can be seen on the 1-week chart. All the bearish signs that have developed, after Bitcoin moved above the 7-week moving average in early February, have been neglected due to the increasing buying pressure behind BTC.
The first sell signal given by the TD Sequential Indicator as a green nine in the first week of April, for instance, was followed by a three weeks consolidation period that ended up in a 70 percent breakout. The other one beginning in June was invalided by a bullish engulfing candlestick pattern, when the following green candle completely overtook the body of the previous red candle, resulting in another 55 percent rise.
In addition, the long upper shadow candlestick pattern that formed two weeks ago was refuted by the 7-week moving average that acted as strong support rejecting the forecasted correction and bouncing off Bitcoin’s market valuation from around $9,600 to more than $13,000.
Not only has Bitcoin undermined these bearish signals, but now a golden cross between the 30 and 50-week moving average is forming adding more credibility to the long-term bullish outlook. This is a pattern that is seen by many investors as one of the most definitive and strong buy signals that predicts an upward breakout.
Since Bitcoin’s bull trend seems very strong, Josh Rager, a cryptocurrency analyst, pointed out that that double top patterns that were able to take BTC to lower lows everytime they developed during the 2018 bear market could now be indicative of exhaustion points. Rager believes that there is a double top formation currently developing that has the potential to create a short-lived correction, but will not affect the overall direction of the trend.
It's likely that fear of a "double top" may be shared by some if price pushes above $13k again
Double tops were a popular reversal pattern in 2018 where price created a double high or near high before the next drop
The big difference though…
2019 is a bull market pic.twitter.com/2ozUjAdCD4
— Josh Rager 📈 (@Josh_Rager) July 9, 2019
If this scenario plays out, the Fibonacci retracement indicator could help identify the different price levels that could act as support (due to the likely high concentration of demand around them). Based on this technical index, a break below the 23.6 percent Fibonacci retracement zone could lead to a further drop down to the 38.2 percent Fibonacci retracement level, which is also where the support trendline is. If these two major support cluster are not able to contain the price of Bitcoin, then this cryptocurrency could find some level of support around the $8,500 and $7,240 zones.
Nonetheless, before Bitcoin can get to $8,500, or even $7,240, it will have to break below the ascending parallel channel on the 1-day chart that began developing in mid-December 2018 when BTC was trading at $3,135. This could pose strong support due to its longevity. Within the last month, every time Bitcoin reached the top of the channel it retraced to the middle of the channel or the bottom and then bounced off to the top once again. Therefore, a similar scenario could be underway and this cryptocurrency may only drop to around $10,500.
Now that Bitcoin is retracing sharply from the recent high of $13,200, a double top pattern has formed which could have the potential to take BTC back to the previous support of $9,800. Although there are a few support points that will have to break before this is achieved, the selling pressure behind the ongoing correction seems to be strong enough for BTC to get (back) down to the four digits.
As a matter of fact, and somewhat unsurprisingly given his track record, Tone Vays has turned his tune from bullish to bearish once again, largely due to the speed at which Bitcoin pulled back.
I have 0 problem become a Bear within 24 hours of becoming a Bull… Ever since price rose > $6.5k I was skeptical of the run up & those that saw todays video know I'm looking for an 80% correction at some point cause of exponential rise.
PS- I don't get #REKT, I use Stop Loses pic.twitter.com/UprKoJ2iJc
— Tone Vays [#UnderstandBit] (@ToneVays) July 10, 2019
Furthermore, Peter Brandt stated that if the current correction violates the “parabolic phase” that started in December 2018, Bitcoin could have the potential to fall a hodler crushing 80 percent from current levels.
If current parabolic phase is violated, we could expect either an 80% correction of 7-month advance or much smaller correction w/ definition of new parabola w/ shallower slope. $BTC Note formation of possible 2-wk H&S or H&S failure pic.twitter.com/6IF1bHREAv
— Peter Brandt (@PeterLBrandt) July 7, 2019
It’s still unclear whether bullishness on longer timeframes will hold. The barrier given by the support trendline, the 38.2 percent Fibonacci retracement level, and the ascending parallel channel are all at risk of being tested. Should these support levels hold BTC’s bullish action may continue, if not, investors should be prepared for (likely short-term) multi-thousand-dollar losses.