Bitcoin Weekly Analysis: Patience is gold!

24 февр. 2020 г.

Another week has passed and last week the price of Bitcoin made a short visit to just above 10k and then fell back fiercely again into the 9k region. The retrace went very fast as a lot of stops got triggered -one after the other- causing a true sell-off. A low of $9,280 was briefly recorded on coinbase, but the price of Bitcoin soon returned to around $9,500 where it spent a day or two in the $9,550-9,750 region. Yesterday the bulls attempted to break the 10k again but the low volume was a signal for me to be very careful with such a rally. For me it certainly offered a good opportunity to go short because in my view the sentiment is too weak and changeable to just break the 10k on a Sunday afternoon with low volume. Twice, the price peaked briefly above 10k, before firmly retracing back. The good thing, though, is that the price of Bitcoin currently seems to hold around $ 9,750 (the top of the channel from last days, see Figure 1), but are we now dealing with a higher low or a lower high? In other words, are we on the eve of a continuation of the rally or will we first go back a bit more? Let's take a look at the charts to see what is important to me in the coming days.


Figure 1 - 4h chart Bitcoin coinbase.

In image 1 I have posted the 4-hour chart of Bitcoin on coinbase and it is clearly visible how the price of Bitcoin returned to the channel of the last few days. In itself, it does not make much difference to me if the price of Bitcoin is finding support on the channel or is back in the channel because the most important observation is that we have seen in recent days that the rallies are slow and fueled with doubt and that the pullbacks are very strong. No, in my view, these are not whales that dump on the market. I think this is the result of a market where on the one hand traders are very scared to miss the boat if we get a big rally but at the same time are also very scared of a bull-trap and therefore a new decline. The result? Stop-losses that are extremely tight and as soon as we slightly dip into the first support zone, a wave of Stops are being triggered that causes other stops to also be triggered. Add to that the huge amount of leverage that we have in the market today and the party is complete. The smart traders then have a lot of buy orders ready because they know that this is the result of bots and stops that go loose for a while and soon afterwards the price surges again. After the price has consolidated, the euphoria returns (or should I say FOMO?) to the market and the price slowly climbs up again (because the halving is coming, and we should be mega bullish right?!) but not on basis of trust. No, the stops are being kept very tight and a little later we see another small retrace turning into an outright sell-off.

The above situation that we now see in the market causes me to think that I do not exclude a further retrace for Bitcoin and that I do not wish to go too long at this moment because I think the market is really too skittish for that. There are 2 possible scenarios for me to open new long positions. Firstly, if the price proves itself by breaking the $10,150 with confidence and also finding support for it, or secondly, if the price drops to the strong support level of $8,800-9,100 and also finds support there. I particularly prefer the second scenario in because the first scenario still carries a considerable risk of a fake-out because the resistance of $10,400-10,500 is hanging tight above there. I have been describing this situation for the past two weeks, and Bitcoin's action over the past week and days has only strengthened my view on this. In addition, a retrace to $8,800-9,100 is also preferred because it provides the market the opportunity to confirm support on both the 200 day as well as the 50 day Moving Average (MA). Confirmed support on these MAs could possibly remove the skittishness from the market and thus form an important foundation for a continuation of the rally we saw at the start of this year.

At this moment, the price of Bitcoin however, only posts lower highs; first $10,500, then $10,300 and now $10,050 followed by sharp dips and although we may also witness a higher low at this moment, it is not enough for me to be excessively bullish and to open new long positions on the $9,500-9,750 level.


Figure 2 - Weekly chart Bitcoin.

In addition, the MACD shows sufficient room on both the 4h, daily and weekly charts for even more decline and the momentum oscillators on the weekly chart are also turning south.

However, it is not just bad news! The long wicks at the bottom of the candles, which we see particularly well on the 4h chart, do offer some hope for the bulls. However, it is not enough for me to go long with confidence at THIS level. Patience is worth gold in a situation like this and I will therefore stay on the sidelines with my longs and look carefully at the level of $8,800-9,100. Make sure you don't get wicked out with stops that are too tight and try to keep an eye on the macro situation because the seas of Bitcoin are boisterous at the moment and the opinions are strongly divided. The trend is still bullish on the weekly chart but don't be tempted to go long too quick as the bears are lurking around as well. Until next week!