This article takes a look at Bitcoin’s Price Development as it Has Occurred Over the Last Few Hours From the Time of This Article’s Release
This will be used to teach a few concepts as well as introduce some ideas that traders maybe did not consider prior to reading this article.
This article is not financial advice. I am not responsible for any money you lose/gain due to what you read below, nor am I advocating for a specific course of action.
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I put a question mark here because it is worthy of one. The market (whales maybe?) appear determined to try to nudge the price of Bitcoin (remember, I said that Bitcoin still serves as a benchmark for the entire cryptocurrency sphere) down below the firm, established support zone that I named the ‘Bull Defense Zone’ (see below):
Given this fact, it seems logical to dive into an overview/price analysis of Bitcoin:
From first glance on the 1H chart, it appears as though the price of Bitcoin has recovered nicely since it hit that localized bottom on June 10th during the sell-off.
I’m going to now go up to a slightly larger TF, to see what the price action looks like there and if there has been enough of a sustained rally for the price movement to have shown up in any meaningful manner on this TF (4H):
From what I saw, it appears as though there is some good news that may be lurking in the shadows for bullish traders.
However, we have to analyze the situation a bit before we hop into that.
As noted on the chart above, today (June 11th, 2018), the RSI on Bitcoin is currently oversold. There is no buy signal on my RSI (obviously), and it appears as though the small spike on price in the most recent period (which is still not over) on the daily, is hardly enough to qualify as divergence.
Here’s Where the Good News Comes in Though:
The last two times that Bitcoin was oversold on the daily was on February 2nd, 2018, and April 1st, 2018.
The following gains from the those localized bottoms to the subsequent ‘tops’ were 93.26% and 54.68%, respectively.
Warning on Taking This As a Clear Signal for Entry
RSI is a range-bounded indicator. This means that, by default, it can only hit a minimum of 0 or a maximum of 100. Therefore, it is somewhat limited in what information it can really reveal to someone in lieu of other major clues such as a witness or another, outside revelation/discovery.
To put that in plain English — the RSI can remain oversold/overbought for however long it wants/needs to. During this time the price action may continue even further lower or higher, depending on what it was reading.
So, if you ever just invest in something under the idea of ‘Oh, this is oversold! So, I know that this is going to bounce back up immediately and I’ll make mad money” <- Strongly reconsider adopting this logic because it won’t work out for and it will almost surely result in a loss of money while trading because markets simply don’t work like that.
That’s Why I Use Rate of Change
For all those that know me, you know that I am a big fan of TradingView’s interface and platform.
Because they facilitate very cool features such as applying an indicator to another indicator.
So, because of TradingView’s existence (thanks guys!), I can apply the Rate of Change indicator to the RSI to help me gauge the momentum behind it in a more concrete way than merely observing divergence.
As expected, it looks like garbage on the 1D chart. But this is only because there have not been enough periods of sustained growth on the daily for any new, emerging trends to be reflecting themselves in indicators such as this (which I’m not sure if they would fall under the leading/lagging category in this instance because RSI is leading, but this takes a backward look at RSI).
So, Let’s Go Back to Our 4H Chart and Give This a Strong Look:
Let’s check out some of the other fundamental indicators that would (could) be bullish indicators for Bitcoin either now or in the near future.
This is Definitely Worth Noting as Well:
It looks like there may be some short-term upside to the Bitcoin price action.
Nothing major here though.
As always, be careful and happy trading!