Ads on various financial instrument always contain a word of caution that say, "Past performance is not a guarantee of future performance". But how many times have we seen investors and traders look at historical data and use that data to make decisions about their investment choices.
Even outside investment such as education, social sciences, economics, etc., people rely on past records to gain insight about a certain phenomenon, along with its behavior and potential direction.
Now, coming back to Bitcoin performance, what can we gain insight from the past that might give us a clue about the direction of BTC in the next couple of days or even weeks?
What I did is to look back at the historical data of BTC, particularly in 2017 when it reached its all time high of 19,468. At the time, BTC reached that price, the RSI also went over 90. Every trader would know at that RSI level, the BTC was extremely oversold. And this was confirmed with the plunging of the price the next couple of days. The gain of 267% from November to December was erased when BTC settled at 7,665 in February, 2018. Let me point out the obvious, the rally happened in the 4th Quarter, November and December, specifically, when everybody's mood was jubilant and along with some extra cash or bonus from employers.
Fast forward into the present, BTC has increased by 122% from November price to December, 2020. In terms of percentage increase, it is lower than that of 2017 but in terms of price, it is substantially higher. Yesterday, Jan. 4, we saw its first red candlestick after sometime. Oh boy, it was a huge one! Its size is about 6,000 pips. It started in the Asian Session and in the European and American Sessions, buyers tried to push BTC into the green zone but were unable to. The trading day ended with BTC in red.
This to me is a sign of buyer exhaustion which the same thing happened in 2017. I checked the RSI and lo and behold, it was again over 90. It seems
like whenever BTC reaches that RSI level, sellers come into the picture to push the price lower.
Is this a reversal or just a bull flag? The answer is contingent on what will happen on the next trading days. If we see again a large red candlesticks in the next 2-3 days pushing the price at 23,000 level I believe this is the start of the end of the bull rally. On the other hand, if the next candlesticks are small settling at 30,000 price level, I will interpret this as forming a bull flag which means BTC is just recovering its breath from the uninterrupted rally that happened last year and gathering energy to move the price higher.
Please, do not take this as an investment advice. This is just my personal reflection about BTC. Trade at your own risk!
