Bitcoin – Not Out of the woods, Yet
Updated
TLDR:
• As long as Bitcoin holds the upward sloping trendline, it is probable that it completed its correction.
• Target for new impulse is at least 39K.
Background:
• Bitcoin is coming out of a two-month (62 days) correction. During this correction Bitcoin’s price dropped by approximately 20%. This correction was (or is) characterized by a lot of range movement and periods reduced volatility interrupted by sudden price moves. In short, a scalper’s paradise and a swing trader’s hell.
• ATM, it looks as if we are on the cusp of making a low and starting a new impulse to the upside.
• I am not a macro analyst, but it looks as if the larger macro environment supports a bullish impulse for bitcoin.
Supporting Evidence for a Bullish Impulse:
1. Bitcoin held the upward sloping trendline. Bitcoin is holding the same upward sloping trendline from December 2022. Although it wicked below, as long as it reclaimed the trendline and did not sustain below it, the uptrend is intact.
2. Bitcoin is above the 200 D EMA. As long as Bitcoin holds the 200 D EMA the bias is to the upside. Bitcoin’s 200 D EMA is at approximately 23,800 USD. It is well below the current support zone. Meaning that Bitcoin is not in an imminent danger of losing the uptrend.
3. DXY is in a downtrend: As a rule of thumb, a weak Dollar is good for Bitcoin. The DXY is forming a Descending Triangle. A Descending Triangle is considered to be a reliable chart pattern with a high probability of breaking to the downside (thepatternsite.com/). The target of this Descending Triangle is approximately 93.
4. The S&P is in an uptrend. The S&P 500 is in an uptrend. The SPX broke above a yearlong resistance line, and it is currently holding well above the 4100 – 4200 horizontal resistance level. I am not suggesting that we trade correlations, but the stock market is a good indicator of the market’s risk sentiment.
Evidence Against a Bullish Impulse:
1. Bitcoin is below the 21 & 50 D EMA: Bitcoin is below the 21 & 50D EMAs. As long as Bitcoins doesn’t clear these EMAs, the bearish pressure is on.
2. Bitcoin is Below the short-term down trending resistance line. As long as bitcoin doesn’t break above resistance it could be just another lower low.
Confirmation of Breakout:
To be able to confidently say that Bitcoin started an impulse I need to see the following:
1. Precondition: No more wicks or candle bodies below the trendline.
2. RSI breakout: Currently the daily RSI is moving in wedge or a channel. Once it breaks above the resistance line, above 50, we can presume that the momentum is in favor of an uptrend.
3. Move above the 21 & 50 EMAs.
4. Move above the resistance trendline.
5. Bullish cross of the EMAs. i.e., short-term EMAs cross above long-term EMAs.
Target:
• The 1:1 Fibonacci extension is at approximately 39,000 USD. The 39K level was an ironclad support during the bull market and I expect it to be resistance. However, it reasonable to expect this level if this impulse picks up momentum.
• If bitcoin fails to create an impulse, I will be reluctant to long. Maybe at the 23,800, the 200D EMA.
• As long as Bitcoin holds the upward sloping trendline, it is probable that it completed its correction.
• Target for new impulse is at least 39K.
Background:
• Bitcoin is coming out of a two-month (62 days) correction. During this correction Bitcoin’s price dropped by approximately 20%. This correction was (or is) characterized by a lot of range movement and periods reduced volatility interrupted by sudden price moves. In short, a scalper’s paradise and a swing trader’s hell.
• ATM, it looks as if we are on the cusp of making a low and starting a new impulse to the upside.
• I am not a macro analyst, but it looks as if the larger macro environment supports a bullish impulse for bitcoin.
Supporting Evidence for a Bullish Impulse:
1. Bitcoin held the upward sloping trendline. Bitcoin is holding the same upward sloping trendline from December 2022. Although it wicked below, as long as it reclaimed the trendline and did not sustain below it, the uptrend is intact.
2. Bitcoin is above the 200 D EMA. As long as Bitcoin holds the 200 D EMA the bias is to the upside. Bitcoin’s 200 D EMA is at approximately 23,800 USD. It is well below the current support zone. Meaning that Bitcoin is not in an imminent danger of losing the uptrend.
3. DXY is in a downtrend: As a rule of thumb, a weak Dollar is good for Bitcoin. The DXY is forming a Descending Triangle. A Descending Triangle is considered to be a reliable chart pattern with a high probability of breaking to the downside (thepatternsite.com/). The target of this Descending Triangle is approximately 93.
4. The S&P is in an uptrend. The S&P 500 is in an uptrend. The SPX broke above a yearlong resistance line, and it is currently holding well above the 4100 – 4200 horizontal resistance level. I am not suggesting that we trade correlations, but the stock market is a good indicator of the market’s risk sentiment.
Evidence Against a Bullish Impulse:
1. Bitcoin is below the 21 & 50 D EMA: Bitcoin is below the 21 & 50D EMAs. As long as Bitcoins doesn’t clear these EMAs, the bearish pressure is on.
2. Bitcoin is Below the short-term down trending resistance line. As long as bitcoin doesn’t break above resistance it could be just another lower low.
Confirmation of Breakout:
To be able to confidently say that Bitcoin started an impulse I need to see the following:
1. Precondition: No more wicks or candle bodies below the trendline.
2. RSI breakout: Currently the daily RSI is moving in wedge or a channel. Once it breaks above the resistance line, above 50, we can presume that the momentum is in favor of an uptrend.
3. Move above the 21 & 50 EMAs.
4. Move above the resistance trendline.
5. Bullish cross of the EMAs. i.e., short-term EMAs cross above long-term EMAs.
Target:
• The 1:1 Fibonacci extension is at approximately 39,000 USD. The 39K level was an ironclad support during the bull market and I expect it to be resistance. However, it reasonable to expect this level if this impulse picks up momentum.
• If bitcoin fails to create an impulse, I will be reluctant to long. Maybe at the 23,800, the 200D EMA.
Note
The down sloping resistance line is doing its job. I expect price to continue to consolidate. At this stage it could go either way.Next resistances:
50D EMA
Trendline at 27K+
28.5K
IMO. If we can get back above 28.5K. we can confidently say that this correction is over.
Note
Not out the woods, yet. However, we managed to test the trendline as support which is positive.
Also, the daily RSI broke the resistance line and we are above the 21D EMA.
carefully (very carefully), optimistic.
Check my doomsday scenario idea. Not because I am expecting a breakdown, but we should be prepared for anything.
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