Bitcoin’s Bullishness at an Extreme
Given Bitcoin’s recent positive price action, it seems fitting that we take a look at where it stands at currently and where its potential trajectory points us toward.
Bitcoin Price Analysis
Most in the crypto community have observed the sharp increase in Bitcoin’s price action over the last 24 hours and, in particular, over the last week:
In the last 10 days, Bitcoin has appreciated by approximately 14%, which is substantial when considering the depth of the bear market that the entire crypto sphere has faced from the beginning of 2018 to this point.
Sticking with the daily resolution here, the most noticeable overhead resistance for Bitcoin is at the $4k market:
The horizontal, dotted green lines in the picture above represent the resistances and supports for Bitcoin on the daily resolution currently.
As noted in previous analyses, if the price is above one of these points, it is a support, if the price is below, then it is a resistance.
In this case, we can see the most immediate overhead resistance is hanging at $4k.
In the picture above, we can also see that the price of Bitcoin hasn’t successfully broken this resistance point since it fell through this support in the beginning of December. In total, it appears that it has been tested three times.
This picture is probably going to cause a bit of angst with readers, but the following diagonal resistance cannot go unnoticed:
The downtrend resistance shown in the chart above is not necessarily significant (weak angle), but it has been hit twice before. It remains to be seen whether the any daily candles will definitively break above this weaker, short-term downtrend resistance.
Exponential Moving Averages
In order to get a gauge of more potential resistance and support points on the chart, we’re going to go ahead and consult some EMA indicators on the daily resolution.
In the picture above, the following EMAs are used; EMA-12, EMA-26, EMA-50, EMA-100, and EMA-200.
Each of the colors corresponds with the number values listed on the top left hand corner of the chart.
Some observations worth noting:
- The price for Bitcoin has surpassed the EMA-50 on the daily resolution, which is a major deal.
- The EMA-12 has crossed above the EMA-26 on the chart as well.
- However, the EMA-50 is still above the EMA-12 and EMA-26. A cross of the EMA-12 > EMA-50 in the near future would be a further confirmation of a greater underlying bullish price action for Bitcoin.
- The EMA-100 and EMA-200 are both overhead resistances.
- The EMA-100 is the most immediate overhead resistance at $4k. This corresponds with our earlier identification of the overhead resistance at $4k by analyzing the price action on the chart.
- The highest overhead resistance can be found at $4.9k, which is far away from where the price is at currently. If and when the price does break this point, that will also be substantial for reasons which we will cover later.
Ichimoku Cloud Analysis for Bitcoin’s Price Action
As we can see in the image above, Bitcoin has just broken above the ‘cloud’ for the Ichimoku. Its worth noting that this candle has not yet closed on the daily resolution at the time of writing, so stating this definitively is a bit premature.
Relative Strength Index(14)
The RSI(14) is fairly close to the designated ‘overbought’ range, but this, in it self, does not necessarily mean that the price action will begin to wane anytime soon. In order to ascertain that information, we must minimize the lookback period of the RSI from 14 to 7.
This transition is reflected in the picture above. As one can see, the value of the RSI(7) on the daily resolution is at 84.89. This is the third highest value for the RSI(7) for Bitcoin on the daily resolution in the last year.
The second highest value came in July 2018 (88.73), and the highest occurred during Bitcoin’s peak in December 2017, which was 97.41.
While the price is a long way away from hitting the peak of 97.41, it is notable to see that the RSI(7) is in such close proximity to where it was in July 2018.
For those that do not remember, the price action was very significant during that month:
Above is a picture of the price action during that month. It is worth noting that the price action now (+14%), is not nearly as volatile as what was experienced during the July 2018 run-up.
Again, it must be noted that the current candle has not closed on the daily resolution. So, this is just what things look like until the period is over. There is little movement for the time being though, so it appears that things may hold until the end of this period (approximately 4 hours left at the time of writing).
Zerononcense Double Guppy Channels
The price is right at the top of the channel at the time of writing, which is usually a surefire sign of an impending reversal.
However, this is also a premature conclusion until the current daily period has ended.
Zerononcense Reversion Ribbon V2 (H2 Resolution)
For the Zerononcense Reversion Ribbon V2, we’re going to go ahead and ‘zoom in’ the time frame for a bit with Bitcoin in order to get a better idea of what the immediate price action may be for Bitcoin (let’s see if this thing still has gas or not).
Given the height of the ribbon (Histogram = Zero Line) as well as the activity of the Histogram in recent periods, it appears likely that the price will begin to consolidate within the next few periods on the H2 resolution.
When this happens, it should be expected that this pattern should begin to exhibit itself in a parallel manner throughout the higher time frames (H4, H8, H12, daily).
While the momentum indicators do tell us that the price of Bitcoin is nearing an ‘extreme’ at this point in time, and that it is very close to the R/R that was given for Bitcoin previously, Bitcoin is not necessarily an obvious short at this point in time.
If an idea were to be placed on Bitcoin, however, it would look like the following:
The R/R on the trade does not really justify placing a short on it at this current point in time. But this is the author’s idea for where the price of Bitcoin might head to next.
Disclaimer: Nothing written about should be construed, perceived or accepted as financial advice. This is not written in advocacy of any personal finance strategies. The information above is simply an idea being promoted as an example of how one can form their own independent trading strategies. Whether the author has designated that they would place a long or short position or abstained from trading is solely their own prerogative; it is not meant to sway your own personal investment strategy.