In yet another perplexing move, cryptocurrencies jumped higher after yesterday's CPI print in the United States. Better than expected results sparked a wave of buying among retail investors pumping the price of Bitcoin above the immediate support/resistance and simultaneously into the bullish zone. However, we think this recent move perfectly shows how irrational markets can become despite mounting evidence that the world will be driven into a deeper recession toward the end of 2022.
In our opinion, the narrative that the FED will step in, cut interest rates and start printing money to avoid recession is wrong. Indeed, we think this narrative is one of the leading causes of the current rally (with technical factors also strongly contributing). Unfortunately, we believe the FED is left with no choice but to increase interest rates to fight inflation. However, by doing that, the FED will risk causing more systemic problems in the stock and cryptocurrency markets.
Therefore, we stick to our bearish outlook when looking beyond the rally. Accordingly, we maintain a medium-term price target of 17 500 USD and a long-term price target of 15 000 USD. For the short-term, we are looking at 26 500 USD with the invalidation level at 24 280 USD.
Illustration 1.01 Illustration 1.01 shows the daily chart of BTCUSD and the trade setup we introduced recently. Simple support and resistance lines are derived from prior peaks and troughs. The yellow arrow indicates the bullish breakout. We stick to our previous assessment of the upside for Bitcoin, which is 26 500 USD in the short term (invalidated if a retracement occurs); however, we will again pay close attention to volume levels.
Technical analysis - daily time frame RSI, Stochastic, and MACD turned bullish. However, they show exhaustion, which may imply the ultimate bull trap above the immediate support/resistance. DM+ and DM- are bullish. Overall, the daily time frame turned bullish. Despite that, we voice caution.
Illustration 1.02 The picture above shows previous and current bear market rallies. The magnitude of moves is measured from the low to the high. The current rally falls into the range of the earlier downtrend corrections.
Technical analysis - weekly time frame RSI, MACD, and Stochastic are slightly bullish. DM+ and DM- are bearish. Overall, the weekly time frame is neutral/slightly bullish.
Illustration 1.03 The illustration above shows previous bullish breakouts and what happened to volume after they occurred. For the bearish scenario and invalidation of the breakout, ideally, we would like to see the same development occur this time again.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
@Valerus_Forex, Thank you, I am glad we both agree on the FED. I wish you a great day.
victorordua
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Great review but I never rely on indicators. best is understanding price action and from my opinion btcs daily bais is big time bearish. tons of liquidity below, market is literally undergoing the 3 pivots of accumulation, manipulation and distribution. we've consolidated for a while and rn this pump is just a manipulation for what's to come. expect 18k. moreover world economy is in distress. who ever says the bullrun is coming are retail traders and these hedge funds are gonna keep on playing with them
A great view as usual, which warns me to calm down from jumping into the trap😁
Tradersweekly
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@AngelaCat, Thank you very much for your sweet words.
as11
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@Tradersweekly thank you for the analysis. At this point, it's beyond question that BTC and equities (esp Nasdaq 100) are tightly correlated. For BTC to drop from its current 23-25K level, to 15-17K (as you predict) at some point in the future, would require us to also believe that stocks will also drop precipitously then. Am I correct in my interpretation that you believe equities have not put the worst behind them?
Tradersweekly
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@as11, Yes, you are correct. Thank you for the comment.
Free_Loader
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@as11 Stocks are in a major bubble, as most cryptos. They inflated on stimulus and zero interest money post-pandemic. Though, this problem has been going on for decades, we’re looking at a Greater than Great Depression. It’s not a question of IF, but WHEN, and the candle is burning at both ends (increasing interest rates on trillions of global debt, now estimated at 300 trillion, and at the other end inflation is destroying people’s lives and purchasing power).