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The king of cryptocurrency continues to confound traders as it trades sideways into what appears to be a bear market. Now hold up. Before you start cursing me, hitting the dislike button, and complaining to PUBLISH0X that I shouldn't be publishing, there is a legitimate argument that Bitcoin has entered a bear market while there are arguments that it remains in a bull market, albeit, teetering on the edge. Let's take a peek.
Going back tot he beginning of the Calendar Year, we see Bitcoin is trading in an arc. The base theory I am applying to the longer view here is that Bitcoin will give us a significant move when it breaks out of its arc. Now, we don't know the direction of the move but we can look at scenarios both directions anyway.
The sideways trading coming off the big May drop has formed a pretty solid declining wedge. This is typically a bullish pattern but we have to use volume to interpret the wedge and the volume indicates that we should prepare for price to break down out of the wedge. The trend in volume is unmistakable.
Let's drill down to the 1H:
Interesting. The 1H reveals that price is already threatening to break down out of the wedge. Note the possible formation of a W reversal pattern over the past couple of days. We know that, in trading, we have to wait until the last leg of the W moves 1/3rd of the way up before the pattern can be confirmed and the trade is considered "safe." Safe, okay, but not without risk. Now, let's stop here and clarify something. This is not financial advice. I am not suggesting that you should take your hard-earned money and buy Bitcoin if the green candle inches up a bit, hits the 1/3rd mark and off to the races... no! I'm pointing out a trading strategy. I don't know your situation and this is not financial advice, it's just technical analysis. Well, some might call it something else but I digress!
Anyway, if BTC goes ahead a print a nicely formed W on the 1H through today and tomorrow, I would not be surprised, the thinking is that the market maker wants to put BTC back in that wedge to continue to induce volume. The market maker knows that breaking down out of the wedge could scare volume out of the market and the market maker lives and dies on volume. So, false move back into the wedge, working the bottom half of the wedge to soak up as much liquidity as possible before dropping price back in line with sentiment, volume tells the tale, watch volume.
One tool to help interpret volume is the Bitcoin Fear and Greed Index.
Before we wrap up, let's take a quick look at the oscillators. I'll show you the 1D and then tell you where they are on the Weekly.
RSi shows 40.45 on the daily, and 42.05 on the Weekly.
CCI is -155.43 on the Daily (a possible buy signal), and -96.31 on the Weekly.
Stoch RSI is plunging on the Daily printing a 4.01/7.38, and continues a slow downtrend on the Weekly at 1.1/1.75.
The sideways trading is evident in those numbers. Although, if you zoom in to the Hourly (because you are a degenerate trader or just curious!) you'll note CCI is at 70 and RSI at 52.74 while Stoch RSI is topping out at 100/88.89.
That indicates to me that price is testing what used to be support at the bottom of the aforementioned wedge at $31,800-$32,000. Failure to break through $32k sends price definitively out of the wedge and down to the $28k zone to test support there. The $28k support level dates back to late Jan. '21. However, if it finds support at $28,800, price remains in the arc. A move down from $28,800 puts the Bears far ahead in the ongoing debate while support at $28,800 could leave price trading sideways between $28,800 and $32,000. That means we are at the top of the next likely range now.
If you are more optimistic, a break through $32k and a flip to support should put us back into the $32k-$36k range. Further buying pressure could send price back to $44k and plenty of analysts are calling for this move. At this point in our arc, it would take buying pressure sending price over $37,900 to break out.
Volume tells the tale, watch the volume.
Happy trading!
