Greetings! Welcome to Bitcoin Worldwide’s Bitcoin TA for the week of 6/17/2018. Check in every Sunday night for our market analysis.
Last week we picked up after Bitcoin had made a sharp move down to the $6,700 range, losing roughly $1,000 in a 48-hour period. This week has primarily seen price consolidate between the range of $6,800 and $6,100.
Our previous post noted a short term long opportunity for a bounce to re-test $7k, with potential to re-short into the low $6k range should $7k fail to hold. The highest price tested after our last post was $7800, followed by a selloff to re-test the February 2018 lows of $6100.
Now let’s dig into the current market:
The 4-hour chart shows a continued consolidation in the range of $6100 and $6500 for the last 7 days. As the week has progressed, price action has begun to coil in a tighter range, forming a symmetrical triangle formation. This pattern formed at the base of a recent selloff is more commonly referred to as a bear flag, which typically indicates downtrend continuation. Furthermore, price has been struggling to maintain a foothold above $6500 which indicates potential weakness around a psychological support level. This timeframe is predominantly bearish.
The 12-hour chart once again aligns with the bearish overtones in the 4-hour chart. The bear flag is more clear from this view and the strength indexes both indicate that there is further room to move down. The most important candles here are the last three, spanning the most recent 36-hour period. Price had bounced but only very weakly so, having failed to break above the recent local high of $6,750. Volume has remained low since the sell-off from above $7k occurred. This indicates that traders are employing a ‘wait and see’ approach.
- Relative Strength Index (RSI) – 30 – Trending down
- TD Sequential Indicator – Potential bottom/reversal zone
The daily chart is interesting for several reasons. Bitcoin is re-testing its 2018 low area near $5900 and has successfully managed to consolidate above it for the last 5 days. The TD Sequential indicator (popularized in crypto by Tone Vays) shows that price is very near a potential reversal zone, with numbers 9 through 13 of this indicator being key levels of over-extension in either direction. The RSI and Stoch however both show room to move down, and the mere fact of price is consolidating near a support zone should not by itself infer that price will not move lower.
This timeframe shows why so many traders appear to be employing a wait and see approach to the market. The potential for a move up is there, however the bearish macro trend mixed with price floating barely above 2018 lows is grounds for caution. Breaking below $5900 is likely to cause short term panic in the market.
- Relative Strength Index (RSI) – Mid Range (40) – Room to move down
- Stoch RSI – Oversold – Cautiously Optimistic – Can range in oversold territory for an extended period
For the weekly chart we appear to once again be setting up for the lowest weekly close of 2018 today. Price is maintaining above the $5500-$6100 support range which is grounds for optimism, however without a catalyst or influx of fresh buyers, it remains likely that the 6-month long bear trend should continue downwards to the next level of support.
While not shown on the chart above, there is a confluence of support from Fibonacci retracement levels at $4900, through to the psychological support level of $5500. The range between these two price points may be a good area for the opportunistic trader to place buy orders for a potential bounce trade. For those who prefer to short, a strong move down early this week may provide confirmation of continuation to new lows.
Buy Markets Percentage
TurtleBC Buy Markets Percentage – 7.14% – In accumulation – Room to move sideways/down
The Buy Markets Percentage is a metric from TurtleBC that may help provide insight into the start and end of bull market cycles. When below 10%, the market may be approaching a period where good buying opportunities become more likely. It is worth noting that this indicator can stay near at 10% range for weeks at a time. These times tend to indicate periods of extended down trends or consolidation. Periods above 75 are when prices and market exuberance are high and becoming over extended.
- Micro Sentiment – Bearish
- Macro Sentiment – Bearish
With the market having consolidated in a $600 range over the last week we appear to be in a holding pattern, waiting for either a move up to re-test $7k+, or a break down below the 2018 lows of $5,900. Given that this year has been a sustained bear market, the odds are higher for a move down than a move up. Ideally we would want to see some sort of capitualtion (heavy panic selling) followed by high volume buying to indicate a turning point for the market. While the market continues to trade anemically the best trade in terms of risk management would be sitting out and being patient.
Day traders may see short opportunities for a move down early to mid this week, with a key level of support being $5,900. If this support fails, a fast a strong move down to new lows is likely, as people react emotionally to the prospect that Bitcoin may well not see new highs in 2018. If this occurs, look for potential profit taking between $5500 and $5000. Trading to the long side should only come after a strong move up has been confirmed by volume, preferably after multiple reversal indicators line up.
Swing traders may prefer to sit in cash again this week. Price has already moved down for a sustained period, making shorting the lows a dangerous game. Entering a long here is also risky for the various reasons noted in the analysis above. Sometimes the best trade is no trade at all.
In conclusion, Bitcoin is currently hovering at a key level just above the February 2018 low of $5900. While price may hold above this level and confirm it as a low for the year, the overall trend for the last 6 months has been down and that should not be ignored. Much as with market tops, bottoms are usually set with a bang and not with a whimper.
This market analysis is provided for educational purposes and is not to be construed as investment advice. Investors should seek professional counsel and do their own thorough research before taking financial risks in volatile markets such as cryptocurrency.