Bitcoin Price Analysis

Bitcoin Price Analysis: A Long Position Still Looks Silly Here

Disclaimer: This article is not financial advice. The author is not a financial advisor and this article was not paid for.

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Foreword

This is meant to be a much more thorough analysis than the last, which was pushed out in somewhat of a ‘rush’ in order to get the review to people a bit quicker.

As always, this is not financial advice — only a reflection of the author’s disposition on the current price action. Any actions that you take are solely your own and no one else’s.

Bitcoin Price Analysis

The theory behind promoting the idea that a short position is best is rooted in the fact that the R/R ratio from this point just doesn’t seem to justify one placing a long position at this point in time.

Now, if one had already placed a long position prior to the current price action, it also might not be a bad idea for them to seriously consider consolidating their profits.

Here are a few reasons why:

Maximum Upside for Bitcoin Isn’t Enormous

  1. There are a number of strong overhead resistance points where the price is at currently as well as just above the price.
  2. The RSI is beginning to falter a bit.
  3. We’re rounding into the month of September, which admittedly isn’t the strongest of reasons — but given September’s history in both the traditional and crypto markets, it’s something that should not be ignored.

We’ll touch on all three points in the charts below.

https://www.tradingview.com/x/cCzbYZDV/

As you can see from the pictures above, this zone that $BTC is in currently is representing a fairly formidable resistance.

The price has failed to break above this point four times in the last month alone. Now, that doesn’t mean that it’s a guarantee that the price won’t break through here, but rather an indication of how strong the resistance is at this level.

However, we can’t ignore the strength of the uptrend spanning back to August 13th.

https://www.tradingview.com/x/z7rqm3xx/

As you can see from the picture above, this uptrend support has been touched a total of 5 times.

So, at this point, we’re getting close to the apex of the flat-top (ascending) triangle formation on the H4 chart.

Source: https://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:chart_patterns:ascending_triangle_continuation

Now, this is typically a bullish pattern — which means that we can’t preclude a breakout in the near future at this point.

However, if the price falls below that uptrend line, then that will probably signal some serious danger for the bulls in that instance.

https://www.tradingview.com/x/oV2ROwUi/

Above are the two different directions that the price may travel in. Although the flat top is typically a bullish chart formation, there is no guarantee that it completes itself.

Overhead Resistance Past This Point

Assuming that the price does breakthrough the $7k-$7.1k range, the next major resistance point would be at $7.5k.

If the price were to break below the uptrend, $6.4k-$6.5k would be the first major support point that people would want to look out for.

The Logic Behind Advocating a Short Based on the Resistance/Support Points

Given the fact that the price that Bitcoin is currently floating at is a major resistance, on top of the fact that there is another major overhead resistance (the downtrend line from March’s last high to this point), that’s right above this resistance just $400 away (which is only about +6%), the R/R on a long position at this point just doesn’t seem viable.

But before we cast our final judgments, let’s take a closer look at the RSI as well.

Relative Strength Index (Daily)

https://www.tradingview.com/x/IViQc4VP/

The golden circles in the picture above are to mark each time that the price has reached the overbought range on the daily chart (14) for the RSI in 2018.

As you can see above, this only happened three different times this year.

Now, currently the RSI(14) on the daily is at 60, which is just shy of the overbought area by a few points (10) — However, given the fact that we are in a bear market, this is something that investors should definitely be wary of, especially if they’re looking at the overbought/oversold regions as definitive indicators of danger.

Price Action in September

We won’t mince any words on this section, we’ll just go ahead and review the month of September for Bitcoin specifically using TradingView’s charts dating back to 2012 on Bitstamp.

September 2017

https://www.tradingview.com/x/ZRlEBDue/

September 2016

https://www.tradingview.com/x/hiCJoNPL/

September 2015

https://www.tradingview.com/x/XvBJv88l/

September 2014

https://www.tradingview.com/x/ULxOyN9w/

September 2013

https://www.tradingview.com/x/abpeQKvw/

September 2012

https://www.tradingview.com/x/Tzq8Vx10/

September 2011

https://www.tradingview.com/x/uUqduDsV/

The average delta for the month of September for Bitcoin over the last seven years = -8.6%.

Perhaps you believe this may be a coincidence, but when juxtaposing these stats with the progress that’s been made in December, you’ll see that there may be something to this whole ‘month analysis’ thing.

Month of September in the Traditional Markets

Not only has the month of September rocked Bitcoin, but it’s also done the same thing in the traditional markets as well.

Check out the statistics aggregated from the website, Moneychimp, which has a tracker that looks at traditional stock market performance over a near 70-year cohort to ascertain which months tend to be ‘positive’ and which ones tend to be ‘negative’ in terms of their average returns.

http://www.moneychimp.com/features/monthly_returns.htm

Above, you can see that the month of September tends to be a crappy month in general, with the average returns in this month over the last 68 years standing at a whopping -0.68%.

There have also been 38 years where the traditional stock markets have posted losses in September versus only 30 years where there have been gains posted during this month.

Compare This to the Month of December (For Traditional Markets)

As you can see above, from 1950 to 2017, the stock market has posted an average delta of +1.53% in the month of December with the overwhelming majority of years (51) being positive, versus negative (only 17).

Such overwhelming numbers are almost impossible to ignore.

Investopedia has an interesting piece on this phenomenon as well:

https://www.investopedia.com/articles/financial-theory/09/october-effect.asp

In fact, a Bloomberg chart that measures the same phenomenon (but also includes dividends, making the data slightly different), shows that September is the worst month of the year when it comes to stock market returns:

Source: https://stansberrychurchouse.com/global-investing/worried-october-effect/

Conclusion

Given all of the above facts and research + historical data, it just seems reckless at this point to go in for a strong long position on Bitcoin (or in any market for that matter).

Call it superstitious, but the stars appear to be aligning for another negative September.

Now, October, on the other hand, is an entirely different beast and something that we will cover in due time; but for now, the author’s stance is firmly in favor of the position that a long position in Bitcoin would be very ill advised.

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