It feels like ages since I last wrote or thought about a bullish breakout in bitcoin. The market has been bad, as we all know.
But I see signs of green shoots now, at least on technical charts. For instance, the relative strength index, the darling indicator of experienced and tyro traders, is crossing above the year-long-downtrend line on the three-day candlestick chart. Ya, you read that right. On the three-day chart, every candle represents three days. The latest candle will end on Aug. 13!
The RSI needs to confirm the breakout on Aug. 13. The question now is whether we should trust the breakout; after all, indicators are based on prices.
I think we should, given the CPI released yesterday has strengthened the narrative that inflation has peaked (even though nobody knows it has), and swap markets have priced out bets for 75 basis point hikes by the Fed in September.
The dollar is falling as I write, the Ethereum merge trade is alive and kicking and the 10-year real yield (FRED: DFII10) seems to be forming a head-and-shoulders pattern.
So, a continued rally toward $30K looks likely. That said, I would building aggressive longs for two reasons:
So, remain flexible and ditch longs if prices fall below $24,000. I would go short if prices drop below $22,600, that would imply a re-test of the yearly low of $17,567.
Also go short if the current 3-day candle closes under $24K.
But I see signs of green shoots now, at least on technical charts. For instance, the relative strength index, the darling indicator of experienced and tyro traders, is crossing above the year-long-downtrend line on the three-day candlestick chart. Ya, you read that right. On the three-day chart, every candle represents three days. The latest candle will end on Aug. 13!
The RSI needs to confirm the breakout on Aug. 13. The question now is whether we should trust the breakout; after all, indicators are based on prices.
I think we should, given the CPI released yesterday has strengthened the narrative that inflation has peaked (even though nobody knows it has), and swap markets have priced out bets for 75 basis point hikes by the Fed in September.
The dollar is falling as I write, the Ethereum merge trade is alive and kicking and the 10-year real yield (FRED: DFII10) seems to be forming a head-and-shoulders pattern.
So, a continued rally toward $30K looks likely. That said, I would building aggressive longs for two reasons:
- Bond markets are not buying the peak inflation narrative. The 10- and two-year yields ended mostly flat on Wednesday.
The Fed is set to accelerate balance sheet shrinkage from next month.
So, remain flexible and ditch longs if prices fall below $24,000. I would go short if prices drop below $22,600, that would imply a re-test of the yearly low of $17,567.
Also go short if the current 3-day candle closes under $24K.