Fellow Fools, traders, and crypto enthusiasts. Welcome to our post on Bitcoin and identifying the possibility of a pullback. While a pullback is very difficult to pinpoint(if not impossible), we can look at some of the underlying factors and indicators to get an idea of what the signals are for a pullback. While we look at a lot of different data points. We'll go over some of the basic items we look at and we'll share what we look for in regards to them. While we are starting to chop around in the market, we are beginning to see some early signs for a pullback. As more develop, we will be sure to keep our subscribers updated with what's going on.
Here are some of the fundamental items we pay attention to:
Extension
One very elementary thing will look at is simply how far has this rally gone from its previous all-time high. In this case it's around 100%. While a lot of firms and people in the crypto space have price targets ranging from $100,000 - $400,000(Guggenheim). This doesn't mean the road to get there is going to be smooth. We imagine that there will be plenty of dips along the way. With the price of BTCUSD now DOUBLE from its previous all-time high. It is inherently bullish, but it also means that everyone who has ever invested in bitcoin is profitable at this point to a large degree. While I know the target's people have are high, usually a target that high needs a spring board. A quick retrace back down to 20k would be a very good spring board and thus needs to be considered as a possibility from here
Technical.
A core indicator we look at is RSI. RSI has now gone higher than any of the euphoric stages BTC was at during the 2017 run. This is generally an indication that a run needs to either cool off or correct down before resuming higher. We generally do NOT use RSI being overbought as a SOLE indication that a particular security is in overbought territory and will correct. You can see in the past during the last bull run that RSI was overbought the ENTIRE time. While it gave indications of pullbacks in hindsight, they did not offer much in the moment. There were roughly four 30% pullbacks. We have had a quick one, but not a pullback that has registered on the larger time frames yet. Regardless, RSI has gotten elevated enough where it's worth a mention and to be looked at.
Chart structure.
On a high time frame like this, we aren't seeing any real chart structure yet that would indicate the pullback is slowing down(IE, Doji candles, etc...). However, we are starting to see some deeper doji candles forming from dip buying on the way up on smaller times frames. While the dip being bought is bullish, the fact that we are getting more sellers means we are seeing people get anxious to book profits. We have also seen larger dips than we previously saw before.
Rotation into Alt coins.
We still have not fully seen this yet. Against a lot of other coins BTC is VERY over sold. As this begins to correct, this would lead to BTCUSD going sideways or starting to pullback if this were to happen. Here are a few examples of oversold Alt coins relative to BTC.
OMG/BTC
ATOM/BTC
XTZ/BTC
Counter points: Companies like MicroStrategy, Paypal, Square, and other major players are scooping up Bitcoin and will ultimately sit on them for some time. This shrinks the supply and thus we see the massive rally at hand with demand exceeding the supply as Bitcoin's get bought up. Will they sell right now? I doubt it. In all likely hood they are targeting Bitcoin $100,000+ and there is no reason for them to sell currently. This doesn't mean we don't get a pullback, but if we get one it's possible it will have to be very short lived if the bull market continues.
The thesis for a sideways move or pullback is that a lot of the major players who have been in the game for some time, Coinbase, Binance, early whales, Bitstamp, etc... Will began taking advantage of the massive amount of institutions driving up the price of BTC and begin to rotate into Alt -Coins to either diversify their holdings. This happened quite dramatically last time.
Foolish conclusion. It's too early to gauge whether or not a pullback will take place. However, we believe the indicators and coins we are watching set up key altcoins for a much larger push higher in the near future. We believe the possibility of Bitcoin moving sideways is high right now. Would we be surprised if we got a pullback as well? No.
Cheers,
TCF
Here are some of the fundamental items we pay attention to:
Extension
One very elementary thing will look at is simply how far has this rally gone from its previous all-time high. In this case it's around 100%. While a lot of firms and people in the crypto space have price targets ranging from $100,000 - $400,000(Guggenheim). This doesn't mean the road to get there is going to be smooth. We imagine that there will be plenty of dips along the way. With the price of BTCUSD now DOUBLE from its previous all-time high. It is inherently bullish, but it also means that everyone who has ever invested in bitcoin is profitable at this point to a large degree. While I know the target's people have are high, usually a target that high needs a spring board. A quick retrace back down to 20k would be a very good spring board and thus needs to be considered as a possibility from here
Technical.
A core indicator we look at is RSI. RSI has now gone higher than any of the euphoric stages BTC was at during the 2017 run. This is generally an indication that a run needs to either cool off or correct down before resuming higher. We generally do NOT use RSI being overbought as a SOLE indication that a particular security is in overbought territory and will correct. You can see in the past during the last bull run that RSI was overbought the ENTIRE time. While it gave indications of pullbacks in hindsight, they did not offer much in the moment. There were roughly four 30% pullbacks. We have had a quick one, but not a pullback that has registered on the larger time frames yet. Regardless, RSI has gotten elevated enough where it's worth a mention and to be looked at.
Chart structure.
On a high time frame like this, we aren't seeing any real chart structure yet that would indicate the pullback is slowing down(IE, Doji candles, etc...). However, we are starting to see some deeper doji candles forming from dip buying on the way up on smaller times frames. While the dip being bought is bullish, the fact that we are getting more sellers means we are seeing people get anxious to book profits. We have also seen larger dips than we previously saw before.
Rotation into Alt coins.
We still have not fully seen this yet. Against a lot of other coins BTC is VERY over sold. As this begins to correct, this would lead to BTCUSD going sideways or starting to pullback if this were to happen. Here are a few examples of oversold Alt coins relative to BTC.
OMG/BTC
Counter points: Companies like MicroStrategy, Paypal, Square, and other major players are scooping up Bitcoin and will ultimately sit on them for some time. This shrinks the supply and thus we see the massive rally at hand with demand exceeding the supply as Bitcoin's get bought up. Will they sell right now? I doubt it. In all likely hood they are targeting Bitcoin $100,000+ and there is no reason for them to sell currently. This doesn't mean we don't get a pullback, but if we get one it's possible it will have to be very short lived if the bull market continues.
The thesis for a sideways move or pullback is that a lot of the major players who have been in the game for some time, Coinbase, Binance, early whales, Bitstamp, etc... Will began taking advantage of the massive amount of institutions driving up the price of BTC and begin to rotate into Alt -Coins to either diversify their holdings. This happened quite dramatically last time.
Foolish conclusion. It's too early to gauge whether or not a pullback will take place. However, we believe the indicators and coins we are watching set up key altcoins for a much larger push higher in the near future. We believe the possibility of Bitcoin moving sideways is high right now. Would we be surprised if we got a pullback as well? No.
Cheers,
TCF
Comment:
With interest in crypto currency still high the foolish thesis is that as long as a base is formed here we'll find a local bottom. If this does occur, we could see a rotation into specific "late cycle" Alt Coins and BTC will grind higher from here over the coming weeks. At the present moment we are looking for Alt's to buy with a lot of upside capture, not necessarily BTC.
Comment:
Alt's are starting to rotate.
How are the coins we posted about doing since writing this? Roughly:
Atom up 50%
Tezos up 40%
OmiseGO up 40%
How are the coins we posted about doing since writing this? Roughly:
Atom up 50%
Tezos up 40%
OmiseGO up 40%
Comment:
Those figures are relative to USD, as an FYI.
Comment:
New idea:
Opinions on Chart's, not financial advice.
