BTC/USD: Hidden Signals of Confirmation 1W (Aug. 07)

X Force Global Analysis:


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In this analysis, we analyze Bitcoin's weekly chart, exploring undervalued/hidden signals of confirmation based on moving averages, and assessing long term bullish probabilities through patterns and Elliott wave counts.

Analysis

- To begin with, we need to identify important Simple Moving Averages (SMA) for this analysis

- The 20 SMA on the weekly is in sky blue
- The 50 SMA on the weekly is in purple
- The 100 SMA on the weekly is in yellow
- The 200 SMA on the weekly is in pink

- We can see that every time the 20 SMA and 50 SMA form a golden cross, the next candle plays out as a corrective trend in the form of a pullback
- A golden cross of the two moving averages that took place in Nov 2015 led to a 41% drop on the next candle
- A golden cross of the two MAs in Jun. 2019 led to a 25% drop on the next candle

- Taking into consideration the fact that the last two golden crosses have led to a form of pullback, probabilities suggest that we could see a corrective trend take place
- The fact that prices have been rejected by 11.6k levels three times adds weight to this probability

- A weekly candle close below 11.6k could confirm the potential formation of an bullish ascending pattern
- Prices creating higher lows, while the highs remain at the same level around the 11.6k resistance
- Counting Elliott Waves, we could expect an Elliott Triangle Wave count (ABCDE)
- Wave E would be in play for one last move, filling the CME gaps, before seeing a real breakout take place
- Based on the Moving Averages and ascending trend line support, it would be highly unlikely that we see a degree of correction breaking the support levels at 6.5k

Market Sentiment:

Long short ratios have increased even more to 75 to 25, with significantly more long positions than shorts. The market sentiment is dominantly bullish, as the Crypto Fear & Greed Index remains at 79; Extreme Greed. It's also important to take into consideration the fact that Google's Search Trend demonstrates a mere 5% increase in the key word "Bitcoin". Without any fundamental development having taken place in regards to the cryptocurrency space, or let alone Bitcoin, it's safe to assume that there hasn't been a massive inflow of retail investors' capital in the market.

What We Believe

While our outlook on Bitcoin still remains bullish for the long term, the long short ratio, Bitcoin's fundamental developments, and technical evidence demonstrate higher probabilities for a short term correction that may be overextended by the bullish market sentiment.

Let us know what you think in the comment section below


Trade Safe.

Comment:

The chart above is Bitcoin's logarithmic chart on the weekly.

Based on two major trend lines, we can make two assumptions:
- It took Bitoin 1127 days to break previous resistance
- As such, while we are close to hitting the 1127 days mark, it's likely that we don't see new all time highs this year

Comment:

With significant indicators on the daily, we can see that after the golden cross of the 20 and 50 SMA on the weekly, the bullish candles are starting to lose momentum, and could potentially close as a doji or as a red candle.

That would indicate that the weekly candle close below the 0.786 Fibonacci retracement resistance, providing more weight to a corrective scenario. There would be a lot of room for correction, as the Ichimoku Cloud, along with many other significant support indicators, are located below the CME Gap at 9.4k.

At the same time, however, the RSI has been rejected from entering overbought territories, which is a good sign for bulls. The MACD also continues to demonstrate increasing bullish histograms on the weekly chart.

The Stochastic Oscillator, on the other hand, adds more weight to a corrective scenario, as it is trading at overbought regions, looking to form a potential death cross, signaling a short term downtrend.

Comment:

This is another perspective on the weekly, showing potentiality of Bitcoin having topped out from the perspective of Bollinger bands. Bollinger Bands are envelopes plotted at a standard deviation level above and below a simple moving average of the price.

Prices have a tendency to bounce within the bands' envelope, touching one band then moving to the other band. This is especially true when prices test the upper band resistance, as marked by the green circles. Price can exceed or hug a band envelope for prolonged periods during strong trends, this has not been the case for Bitcoin's weekly chart, as all tests of the upper band have ended in a rejection.

Comment:

Going back to the logarithmic chart on the monthly, we can spot three significant trend lines that have acted as major support and resistance levels throughout Bitcoin's price history since 2012.

We have seen Bitcoin bounce and trade above the steepest ascending trend line as long term support, and a break down from that support level down to 3.1k levels, where a new trend line has formed.

We have seen Bitcoin's price rally through the second trend line, bouncing on support again, testing the 0.786 Fibonacci resistance at 13.4k levels before a pullback to retest support.

Once again, just as the price movement in 2018, prices broke through support, creating our final trend line. While we have currently managed to break through the 0.618 Fibonacci resistance, bulls need to break through the 0.786 Fib resistance once again, to continue their rally. As we have been rejected by resistance zones and have broken down from significant support trends twice, a solid confirmation such as a break and close above the second trend line is necessary for a long term bullish trend.