There has been significant price movement for Bitcoin since the last time we took a look at its charts, so this price analysis will take another look at what has transpired since our last analysis and evaluate what additional insights, if any, can be made with regards to Bitcoin.
Bitcoin Price Analysis: Intro
Above, is a chart of Bitcoin’s current price action on the daily resolution. If you refer back to our prior price analysis of Bitcoin, you should note that none of the resistance/support lines have been at all.
The message contained in the photo above was not added either.
Thus, we can see that, as the note stated, the $10.5k-$10.7k has served as a potent overhead resistance. Specifically, it was stated that the price could not be considered to be back on the ‘breakout’ until it has surpassed that zone.
At this point, it has failed to do so but the price is still nudging against the resistance, which is a good sign for bulls when considering the fact that this adherence to this resistance point is accompanied with a reversal in momentum of the RSI(14) on the daily resolution (which we’ll discuss later in this price analysis).
Additionally, we can see that the $9.3k support point has held as well (see picture below):
Double-Top Chart Formation Confirmed
As we expected in our previous two price analyses, a double-top chart formation did end up appearing on the daily resolution for Bitcoin.
Double-Top Chart Formation Review (Brief)
If you’re already familiar with the double top chart formation, you can skip this section.
For those that may not be familiar with it, below are some reference materials that explain what it is and how it works:
Above is a definition from Investopedia on double-top chart formations.
Below are more chart examples:
Confirming the Double-Top Chart Formation on Bitcoin
Using the preset indicator, ‘Zig Zag’, which traces price action with straight lines in order to help traders observe emerging chart patterns with greater ease, we clearly see the formation of the Double-Top Chart Formation.
The final leg down hasn’t yet appeared for the Zig Zag pattern due to the default lookback period setting in the indicator’s default code, but if this lookback period were shifted down (fewer periods to lookback at), then the final leg down would be shown clearly.
In order to compensate for this, we will lower temporarily lower our current chart time resolution from 1D (1-Day) to the H10 (10 Hours):
In the above picture, we can see the Double-Top Chart Formation a bit clearly, although there are some intermittent price moves on the H10 resolutions that stop the Zig Zag indicator from forming tracing the pattern perfectly.
Brief Insight on the Double-Top Chart Formation on Bitcoin
One insight that traders should takeaway from the Double-Top Chart Formation on Bitcoin is that the pattern has completed itself, per traditional standards of the characteristics of a Double-Top Chart Formation.
Characteristics of Bitcoin’s Double-Top Chart Formation:
- Height of the Two Peaks = $12.3k-$12.5k
- Neckline = $10.5k
- Distance Between the Neckline and Peaks = $1.8k-$2k
Below is a chart that shows the markings with a few other points of analysis:
At this point, the pattern is no longer in effect on Bitcoin because a pronounced ‘bounce’ has already occurred (see below):
Taking a Brief Look at the Daily Candle
Below, we’re going to take a closer at the daily candle that is currently forming on Bitcoin:
The long tail south of this daily candle that is still forming shows us that the bears have tried to push down the price today unsuccessfully. Bulls were able to consolidate the losses back to the resistance point.
Two Takeaways From the Daily Candle (July 18th, 2019):
- The overhead resistance that we have mapped out with the green-dotted horizontal line is serving as a very potent resistance currently because the price is unable to break above it.
- Despite the strength of the overhead resistance the bulls have been able to maintain control over the past 48 hours. A view of the daily candle at the time of writing (which will close in 45 minutes) shows us that the bears have tried to fight the bulls but have been vastly unsuccessful thus far. If the bears continue to be unsuccessful, then they may become further exhausted than they already are.
Other Technical Indicators on Bitcoin
Relative Strength Index(14) [Daily Resolution]
This indicator may be the most important one that we’ll look at in this price analysis because it will either confirm or deny our suspicions that bulls are beginning to take control of the price action once again.
The RSI(14) is still plummeting and there does not appear to be any imminent signs of a momentum shift that can be observed on the daily resolution either.
Balance of Power RSI [Custom Indicator]
In the picture above, we can see the Balance of Power RSI (custom indicator) showing us a massive increase in buy pressure on Bitcoin on the daily resolution since July 17th, 2019 (approx. 48 hours ago from the time of writing).
If we pan out, we can see that there is no divergence between the Balance of Power RSI and the price action currently. So this indicator is not telling us anything that cannot be seen with the naked eye looking at Bitcoin’s price action:
Exponential Moving Averages (EMA) ; Bitcoin Avoiding Serious Danger(!)
Below is a Bitcoin chart (daily resolution) with the EMA-50 applied to it (golden line):
For those that cannot see the clear danger that Bitcoin bulls were in, the following charts should outline this more clearly:
Additional Things to Consider in the EMA Analysis
Below are a few points to take into account/consideration from the EMA charts above:
- Bitcoin fell below the EMA-50 on July 16th, when a massive sell-off plunged the price downward by 13% that day alone.
- The following day (July 17th) Bitcoin’s price opened, closed and had a intraday ‘high’ that was below the EMA-50 on the daily resolution. The last time this happened was on February 16th, 2019 (two days before the price eventually crossed above the EMA-50 on the daily resolution).
- The last time that the price of Bitcoin had opened, closed and had an intraday high that were all below the EMA-50 on the daily resolution after descending below the EMA-50 was September 6th, 2018. This date is worth noting because it marked the start of the final leg of the bear market. From that point, the price dropped -52%.
- Similarly, when the price eventually crossed above the EMA-50 on the daily resolution on February 18th, 2019 (after spending 5 months below this point), Bitcoin saw an increase of +278%.
The main takeaway from the numbered points above is that crossovers, above or below, the EMA-50 usually are precursors of major price action. This goes without saying, but when there is a cross below the EMA-50, this usually foreshadows a precipitous drop in the price and when there is a cross above, this usually foreshadows monumental price gains.
Thus, when Bitcoin dropped below the EMA-50 on July 16th, 2019, precedent established that there was a very clear and present threat to bulls.
However, there are a few factors that mitigated the potential doom and gloom that one could typically expect in such a scenario:
- Bitcoin’s prior price action over the last few months has been overwhelmingly bullish. Typically, crosses above or below the EMA-50 that are associated with major gains/losses in the market compliment the prior trend. For example, when the price had crossed below the EMA-50 on the daily resolution on September 6th, 2018, there had already been a strong bearish trend in price action for Bitcoin throughout that year. Similarly, there was strong underlying bullish signals from technical indicators when the price of Bitcoin finally crossed above the EMA-50 on the daily resolution on February 18th, 2019. There are no instances in Bitcoin’s price history where there has been a cross below or above the EMA-50 that has coincided with subsequent major price increase/decrease in that same direction that started with a trend reversal.
- The break below the EMA-50 occurred on a day where the price had dropped -13%. Losses of this magnitude (over a 24-hour period) for Bitcoin are typically created by a short, sudden sell off in the markets, which trigger a number of stop-loss orders as well as liquidations at various exchanges. The triggering of these events then leads to further price loss, which subsequently causes even more loss in the market, essentially manifesting a “self-fulfilling” prophecy of price action until bears are no longer able to push the price down further or all major positions across the ecosystem have been liquidated. Thus, this price drop should not be seen as indicative of the market’s true valuation/price discovery for Bitcoin.
- The significant bounce back that occurred after the drop below the EMA-50 should serve as a strong signal to traders and surveyors of the market that the recent losses are more than likely not the start of a major trend reversal.
Short Term Outlook for Bitcoin (Zerononcense Analysis)
Based on what is presented above, the short-term outlook for Bitcoin’s price action is still opaque.
None of the classical technical indicators (including a few that were not shown above) are showing that the bulls are in control. However, other points of analysis, such as; the support bounce at $9.3k, the rebuff of bears that can be seen on the daily candle for July 18th, and the price’s adherence to the overhead resistance at $10.5k (this was the neckline for our Double-Top Chart Formation) all indicate that bulls may be making a strong underlying push.
However, given the fact that $10.5k is proving to be a significant overhead resistance and there is no reliable sign of serious bullish momentum apart from the observations that were listed above, there is a chance that the price does get rejected at this resistance to test the nearest, most reliable support.
Nearest, Most Reliable Support
This point would be the EMA-50, as discussed above. For all of the reasons included under that section, the EMA-50 should be considered a significant support point.
Zerononcense does not anticipate that the support provided by the EMA-50 will be broken.
Long-Term Outlook for Bitcoin (Zerononcense Analysis)
Given what was stated in the short-term outlook analysis section (prior to this one), Zerononcense expects that the Bitcoin will persist, even after this recent, bearish hiccup.
Given all of the factors mentioned above and throughout this long-form price analysis, the trade idea for Bitcoin is as follows:
*Disclaimer: None of what was posted above is financial/investment advice and should not be perceived as such, you are not reading this on a platform designed to give such advice or solicit investment into any product in the cryptocurrency markets or elsewhere. These are merely observations and insights that are pertinent and relevant to cryptocurrencies because of their inherently financial nature as innovations in the financial technology sphere.
Example: (i.e., one cannot assess the longevity of the Proof of Work mining model without assessing the price of Bitcoin, making cryptocurrencies a unique technological innovation that requires a more holistic assessment of what constitutes “financial/investment” advice. In this case, nothing that has ever been posted in this channel is meant as such.)