Bitcoin Price Analysis: Bump Impending

This was spoken about in the main Telegram chat as well as other sources ad infinitum, but this is a formal article to outline why the market should expect a fairly dramatic boost in the price of Bitcoin in the coming days and weeks.

The purpose of this article will be to outline all of the reason for this renewed bullish stance (short-term) on the price of $BTC #Bitcoin.

Bitcoin Price Analysis

Let’s start by checking Bitcoin on the scrolled out daily view.

In the picture above, the golden circles represent the times that the price intersects with the downtrend line.

As you can see, on a long-term basis, the downtrend for Bitcoin has remained strong-intact.

It’s also worth noting that there are multiple downtrend resistance levels. These are best shown by the Gann Fib indicator, as shown below:

As you can see above, the Gann indicator has been remarkably accurate in predicting the bounces of Bitcoin across various channels.

Now Let’s Take a Look at RSI(14) on the Daily Now

The divergence on the RSI(14) is ridiculous at this point — headed from the oversold territory.

The divergence has been sustained for a number of days at this point, and this is after the price unsuccessfully attempted to break through the $5.8k-6k support area.

Here’s a very interesting observation that was made recently on Bitcoin (by the author, so if you see it anywhere else on planet earth it was plagiarized)

  1. January 12th, 2015
  2. April 12th, 2015
  3. August 16th, 2015
  4. January 14th, 2016
  5. July 30th, 2016
  6. July 14th, 2017
  7. February 7th, 2018
  8. April 6th, 2018
  9. June 11th, 2018
  10. August 12th, 2018

If you see from the charts labeled above, 6/10 of the last 10 daily oversold (RSI(14)) points have occurred between the 11th-14th of the month.

While this presents no guarantees on future price action, it is definitely something worth mentioning.

Exponential Moving Average Analysis

This has been mentioned several times before, however, one facet of the EMAs, which has not been mentioned before is the fact that the distance between each of the indicators tells us something about the momentum of the price.

Here are two principles to remember:

  1. The closer the EMA indicators are together, the lower the momentum of the price in a given direction.
  2. The greater the EMA indicators are from each other, the higher the momentum of price in a given direction.

In the picture below, you can see the EMA-12, EMA-26, EMA-50, EMA-100 and EMA-200:

As you can see above, the price has already crossed above the EMA-12 (which is hanging at $6,518). TradingView is nice enough to provide the exact values for where these indicators lay. The color of the price corresponds with the color of the line on the chart as well, for easier identification of the EMA values (if you were unsure).

Here’s a better view above ^

Analyzing the distance:

Currently, the EMA indicators are within about 2.5–3% of one another.

Compare that to where they were, just a few short weeks ago:

On May 16th, 2018, the price of Bitcoin was approximately $8.4k, and the EMA indicators held the following values:

EMA-12 = $8,814

EMA-26 = $8,826

EMA-50 = $8,776

EMA-100 = $8,768

EMA-200 = $9,024

The average distance between those EMA indicators was <0.5%, which is susbtantially lower than the 3% that we are witnessing now.

As you can see, the point that was chosen above was one in which the lines were converging among each other and crossing.

This was a key indicator that the direction of Bitcoin’s price movement was beginning to reverse trend entirely.

Now, let’s visit back to where we were before:

As we can see in the chart above, the EMA-12>EMA-26>EMA-50>EMA-100>EMA-200.

In order to confirm a definitive change in trend, a convergence among the indicators needs to be seen.

The first cross that would be expected would be of the EMA-12 > EMA-26.

So, the distance between those two indicators should be observed.

Currently, the distance between the two are still widening on the daily chart.

However, a swift move upward could change that — which would be an indication of, at the very least, a waning in the momentum of the downward price trend.

Chart Analysis

Perhaps the most obvious observation that can be made is the fact that Bitcoin is still trading within a trading range at this point in time:

The price movement’s range in the light-gold box seen in the chart directly above is $6,000 (approx.) to $6.5k (approx.).

A break above or below the trading range would indicate either a heavy bullish or heavily bearish bias in the price, respectively.

Currently, the price is nudging against the $6.5k resistance mark and looking to break above. This, in itself, signals that bullish expectations are more rational.

When juxtaposing this information with the fact that there is strong divergence (heading from the oversold territory) to this point, there seems to be a lot of credibility behind the belief that the price has a solid opportunity to break through the $6.5k barrier.

Possibility of a Double Bottom Developing

Above, is a graph of the inverted Bitcoin price, on the 3-day time frame, using a logarithmic chart.

The reason why this chart is inverted is because it seems a bit easier to observe a double-top pattern, rather than a double-bottom pattern for some reason.

As one can observe in the inverted Bitcoin price chart above, the price has failed to break the “resistance” established by the $6k price.

It also appears as though momentum is waning in the price action, and that the price is beginning to tilt in the other direction.

If this does happen, then a double-top pattern (on the inverse Bitcoin chart), will be confirmed once the price exceeds the $8.2k mark.

See below:

For those not familiar with this chart pattern, please review the following material:

For the double-top (and double-bottom) pattern formation(s), the price target is determined by:

  1. Taking the approximate distance between the top (if it’s a double-top pattern) or the bottom (if it’s a double-bottom pattern) where the price failed to make it past and measuring the distance between those two points.
  2. Then, substracting (if it’s a double top) or adding (if it’s a double bottom) that total to the price at the neckline.

In this instance, the distance between the two bottoms and the neckline is approximately $2k, which is substantive:

Therefore, the price target would be $8k (neckline) — this total ($2.1k).

But, remember, we are on the inverse chart, so we would instead add these two totals together in order to receive our target.

That would land us at approximately $10.1k.

Let’s comb back to the chart to see if there is anything of significance at that price (we’ll revert back to the normal chart this time):

The answer to our query of whether this would land us near a “significant” level is somewhat.

If you revert back to the normal, 1D chart for Bitcoin, you’ll see that the previous high for Bitcoin was right around that total of $10.1k on May 5th-6th, and before that, this served as the neckline for the double-top that occurred in March when the price failed to break past the $11.5k mark.

Therefore, it’s plausible.

However, there are a lot of things that must happen between this point and that point.

Such a gain would also constitute a near 70% bounce from where the price is now.

However, this would not be unprecedented as its something that we observe from Bitcoin’s first bounce from this region after February’s sell-off (in fact, the price nearly doubled).

In the chart above, we can see a near 100% gain in the price since that gain occurred.

However, after each bounce from the corresponding bottoms, the gains have been smaller.

What does that mean?

It means that the downtrend is still firmly in place.

Understanding Swing Lows, Swing Highs, and Divergence

One thing that is not talked about frequently enough in trading is the presence of swing lows and swing highs.

First, let’s define the terms.

Swing Low:

Source: https://www.investopedia.com/terms/s/swinglow.asp

In laymen’s terms, this means that the low established by the price is lower than the previous low (the only thing that is really relevant here is the previous low, not the previous low before the previous low, or the one before that, etc.)

Check this out in the chart below:

The chart above shows the previous two lows to provide a context for where we are now.

After the most recent low was hit in late June, the downtrend of Bitcoin was reaffirmed.

This was even further reaffirmed when the next high failed to break the last one:

By completing the lower low, in conjunction with a lower high, we can confirm that the price action for Bitcoin signified that the downtrend was still well in place at that point.

There is some positive news though, however.

The distance between the successive lows has been decreasing overall throughout the year 2018.

While there is no hardlined theory on that, the author considers that to be bullish.

Understanding Swing Highs

Since we have already spoke on the incidence of swing lows, let’s discuss swing highs.

Unlike swing lows, swing highs reflect a higher high than the previous one.

Here is a definition and an illustration below from Investopedia:

This actually puts Bitcoin in an interesting position…

Evaluating Bitcoin’s Current Price Position in the Market (Within the Context of Swing Highs and Swing Lows)

If you look at the chart below, you can observe how Bitcoin’s low (if this truly does serve as the ‘low’ for this period), is higher than the previous one.

Now, let’s evaluate the RSI during both of those points (to check for hidden divergence):

The difference is almost imperceptible, but it is definitely there — which is another positive sign for those that have bullish expectations for the price movement of Bitcoin.

So, What’s Next?

Since $8.2k was the previous high, that is the market that Bitcoin would need to beat to establish a true trend reversal.

One thing that could potentially undermine this potential run in the price, however, is the ETF news.

Brief Fundamental Analysis

As mentioned numerous times prior, the ETFs that have been rumored to be a ‘shoe-in’ for acceptance were delayed by the SEC earlier this month (August).

While the price was already in decline at the point that this news announced, it fell precipitously from that point onward.

As you can see above, while the price was already falling at that point, it began to fall at a much faster rate of increase after the news of the ETFs being delayed was released.

We can see that the price fell a total of 17.18% in just one week after this news hit the scanners.

However, this is a bit odd when considering that this was not necessarily an unanticipated update.

The SEC had delayed their rulings on the Bitcoin ETF the previous two years.

Conclusion

The question of whether the price is going to go up or not seems to be a moot point right now.

However, the real question is by how much and how long it will be sustained for.

With the RSI(14) just creeping out of oversold territory, there appears to be a lot of room to grow. However, that RSI could turn down at any point (although, this does not appear to be in the cards).

There is a chance that $7.2k is the max uptake on this next move. This all depends on the speed of the price movement. If the volatility is low and it takes a while for the price to increase, then the scenario just described in the previous sentence may be what eventually comes to fruition.

However, if the price accelerates rapidly, then there may be a re-test of the $8.2k mark. Failure there could have disasterous consequences for the price of bitcoins, though.

Investors should remain wary and vigilant on the markets, as always and take things day by day.

We will continually push out reviews like this one on a daily basis moving forward throughout the rest of the year, so, don’t worry! We will make it through this together :).

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