Bitcoin Weekly Analysis: Weakness in a strong rally.
Hi, I’m David and I write one of the most read columns in the Netherlands about Bitcoin on a Dutch crypto platform for several years now. I'm also the author of Alpha Mindset: a weekly newsletter about how to improve your Mindset to gain Alpha in the markets. This weekly analysis on TradingView is an english translation of my Bitcoin columns. I hope you enjoy! More info about me you can find in my bio. Follow me on twitter for the latest updates.
While the price of Bitcoin (and many alt-coins) keeps going up and the trend in the medium and long term are very bullish, I see some weakness and signs in the short term that made me to take some gas back on my longs over the weekend. My main reasons for this are the relatively low volume of the rally lately, the extremely skewed distribution between long and short positions, a very high amount of open interest on -among others- Bitmex (but this is also a characteristic on other exchanges) and the -in my view far too one-sided colored bullish messages and analyzes on both twitter, TradingView and in the media. Don't get me wrong, I am bullish in the medium and long term as I have indicated several times in recent weeks, and I have a strong feeling that the current bull run only just started. Nevertheless, a bull run never goes up in a single line and a strong rally also occasionally has moments of weakness and a short retrace. Although timing a retrace in a strong bull run like this always proves to be very difficult, I do think we are approaching such a moment. I am more cautious in the short term and I have my focus set on a number of support and resistance levels. Let's start by taking a look at the charts from coinbase!
Figure 1 - Daily chart Bitcoin coinbase with momentum indicators.
**update**
I had already written this column on Sunday evening, but early this morning (Monday) the price of Bitcoin indeed broke down through the $ 10,000. I left the intro the same but adjusted the rest to increase the value of my column for you. In figure 1 you can see the graph from early this morning with the signals for a pullback getting stronger. A daily candle that was coloring red and momentum indicators that showed weakness and were rolling bearishly.
As I indicated, there was already some weakness visible on the charts last weekend that made me cautious and I would not be surprised by a sharp retrace. I already shared this on twitter and in our premium members group. However, this does not mean that the long and / or medium term is now also bearish. These types of pullbacks are an important part of a healthy rally and often the result of excessive optimism. The beauty of these types of pullbacks? It offers excellent opportunities to take new long positions and also enables us to validate the value of the recent rally.
The price of Bitcoin broke down quickly through the $ 10,000 and found support on $ 9,736 on coinbase. After that we noticed a quick rally at this level and the first thing that I then look at is whether the $ 10,000 is now suddenly becoming a resistance as the price of Bitcoin found support on that level several times over the weekend. If the price now breaks upwards through the $ 10,000 again, we can speak of a fake-out downwards. However, if the $ 10,000 now starts to act as a resistance, I would personally first look for support on the $ 9,500 – 9,600 zone which is clearly visible on the daily chart (figure 2)
Figure 2 - Daily chart Bitcoin coinbase.
At the moment, however, we see a nice support wick on virtually all timeframes, but this can still be the effect of excessive optimism in the market which is still strongly prevalent. As soon as the $ 10,000 starts to act as a resistance that is too strong to break in the short term a drop further back can quickly lead to panic. These are the moments when the best opportunities arise because people quickly forget that the medium and long term is still bullish, and people become too bearish. These are the kind of opportunities that I am looking for in a bull run like this and if the price is currently experiencing too much resistance at the $ 10,000 level then the region around $ 9,500-9,600 would be a region where I would look for new long positions. If that doesn’t hold, I would look at the $ 9,000-9,200 region as the next support zone.
On the other hand, a confirming break through the $ 10,000 again would also lead to a nice entry as this would imply that the break down was a fake-out. In addition to that, the sharp rally that immediately followed after the dip with a low at $ 9736 would indicate that the bulls are still in control - also in the short term.
The weekly chart, however, offers moderate signals that the price of Bitcoin could go deeper into the $ 9k (Figure 3)
Figure 3 - Weekly chart Bitcoin coinbase.
The momentum indicators show that the rally is decreasing in strength (something we also see in the volume and noticed on the daily chart) and that the Stoch-RSI is about to roll over, the RSI is flattening out and the CCI is already rolling over downwards. However, this does not mean that we are now also going low into the $ 9k. These moments are generally quite difficult as you can easily lose the overview because of contradicting signals. As of this It is important to have a clear strategy in mind. Personally, in these cases I first look at the longer-term trend and the charts on the higher time frames (weekly and monthly for example). These charts are still very bullish to me and this helps to filter the short-term noise. The current pullback offers me a chance to open new long positions but I am not satisfied with the first best dip. Make sure you are in control and do not allow yourself to be guided by emotions too much. There is no rush. Depending on the price action (and in particular how the price responds to a certain support level, for example with a lot or a little volume) I am currently looking for new longs in the region of $ 9,500-9,600 and if we go through that on the level of $ 9,000-9,200. Personally, I am not very interested in opening new positions on the $ 10,000 level -if we break through that again- because I am already satisfied with my current long exposure and only wish to increase my holdings if really beautiful gems occur. It promises to be a very exciting week! Keep your head clear and stay in control. Till next week!
While the price of Bitcoin (and many alt-coins) keeps going up and the trend in the medium and long term are very bullish, I see some weakness and signs in the short term that made me to take some gas back on my longs over the weekend. My main reasons for this are the relatively low volume of the rally lately, the extremely skewed distribution between long and short positions, a very high amount of open interest on -among others- Bitmex (but this is also a characteristic on other exchanges) and the -in my view far too one-sided colored bullish messages and analyzes on both twitter, TradingView and in the media. Don't get me wrong, I am bullish in the medium and long term as I have indicated several times in recent weeks, and I have a strong feeling that the current bull run only just started. Nevertheless, a bull run never goes up in a single line and a strong rally also occasionally has moments of weakness and a short retrace. Although timing a retrace in a strong bull run like this always proves to be very difficult, I do think we are approaching such a moment. I am more cautious in the short term and I have my focus set on a number of support and resistance levels. Let's start by taking a look at the charts from coinbase!
Figure 1 - Daily chart Bitcoin coinbase with momentum indicators.
**update**
I had already written this column on Sunday evening, but early this morning (Monday) the price of Bitcoin indeed broke down through the $ 10,000. I left the intro the same but adjusted the rest to increase the value of my column for you. In figure 1 you can see the graph from early this morning with the signals for a pullback getting stronger. A daily candle that was coloring red and momentum indicators that showed weakness and were rolling bearishly.
As I indicated, there was already some weakness visible on the charts last weekend that made me cautious and I would not be surprised by a sharp retrace. I already shared this on twitter and in our premium members group. However, this does not mean that the long and / or medium term is now also bearish. These types of pullbacks are an important part of a healthy rally and often the result of excessive optimism. The beauty of these types of pullbacks? It offers excellent opportunities to take new long positions and also enables us to validate the value of the recent rally.
The price of Bitcoin broke down quickly through the $ 10,000 and found support on $ 9,736 on coinbase. After that we noticed a quick rally at this level and the first thing that I then look at is whether the $ 10,000 is now suddenly becoming a resistance as the price of Bitcoin found support on that level several times over the weekend. If the price now breaks upwards through the $ 10,000 again, we can speak of a fake-out downwards. However, if the $ 10,000 now starts to act as a resistance, I would personally first look for support on the $ 9,500 – 9,600 zone which is clearly visible on the daily chart (figure 2)
Figure 2 - Daily chart Bitcoin coinbase.
At the moment, however, we see a nice support wick on virtually all timeframes, but this can still be the effect of excessive optimism in the market which is still strongly prevalent. As soon as the $ 10,000 starts to act as a resistance that is too strong to break in the short term a drop further back can quickly lead to panic. These are the moments when the best opportunities arise because people quickly forget that the medium and long term is still bullish, and people become too bearish. These are the kind of opportunities that I am looking for in a bull run like this and if the price is currently experiencing too much resistance at the $ 10,000 level then the region around $ 9,500-9,600 would be a region where I would look for new long positions. If that doesn’t hold, I would look at the $ 9,000-9,200 region as the next support zone.
On the other hand, a confirming break through the $ 10,000 again would also lead to a nice entry as this would imply that the break down was a fake-out. In addition to that, the sharp rally that immediately followed after the dip with a low at $ 9736 would indicate that the bulls are still in control - also in the short term.
The weekly chart, however, offers moderate signals that the price of Bitcoin could go deeper into the $ 9k (Figure 3)
Figure 3 - Weekly chart Bitcoin coinbase.
The momentum indicators show that the rally is decreasing in strength (something we also see in the volume and noticed on the daily chart) and that the Stoch-RSI is about to roll over, the RSI is flattening out and the CCI is already rolling over downwards. However, this does not mean that we are now also going low into the $ 9k. These moments are generally quite difficult as you can easily lose the overview because of contradicting signals. As of this It is important to have a clear strategy in mind. Personally, in these cases I first look at the longer-term trend and the charts on the higher time frames (weekly and monthly for example). These charts are still very bullish to me and this helps to filter the short-term noise. The current pullback offers me a chance to open new long positions but I am not satisfied with the first best dip. Make sure you are in control and do not allow yourself to be guided by emotions too much. There is no rush. Depending on the price action (and in particular how the price responds to a certain support level, for example with a lot or a little volume) I am currently looking for new longs in the region of $ 9,500-9,600 and if we go through that on the level of $ 9,000-9,200. Personally, I am not very interested in opening new positions on the $ 10,000 level -if we break through that again- because I am already satisfied with my current long exposure and only wish to increase my holdings if really beautiful gems occur. It promises to be a very exciting week! Keep your head clear and stay in control. Till next week!