Market Overview: Bitcoin
In last week’s analysis, we focused on the broader perspective offered by longer timeframe charts of Bitcoin. This week, the market triggered a low 2 signal on the monthly chart, indicating a potential shift in sentiment. On the weekly chart, it appears that bulls have relinquished the idea of buying within the $60,000-$70,000 range and may now be awaiting the $40,000-$50,000 range before re-entering the market.
Despite this short-term bearishness, the long-term outlook for Bitcoin remains decidedly bullish. These price fluctuations may be creating favorable buying opportunities with an attractive trader’s equation. In this report, we delve into the weekly and daily charts to uncover the intricacies of the current market dynamics and explore potential scenarios that may unfold in the coming weeks.
Bitcoin
The Weekly chart of Bitcoin
Bitcoin experienced a remarkable rally from $30,000 to surpass $70,000. Subsequently, the price has been consolidating within a $15,000 range for 17 weeks, exhibiting a limit order market behavior characterized by buy low, sell high, and scalp trading strategies.
Four weeks ago, we cautioned about the potential for a short-term bearish momentum as the price stalled for the third time at the $70,000 resistance level. This downward pressure may have been initiated by bears selling at $70,000 with limit orders, but it is more probable that were bulls exiting positions.
This week, the price is poised to close below the 20-week Exponential Moving Average (EMA) for the first time since the robust rally. Historically, this occurrence presents a buying opportunity for bulls. However, caution is advised due to the prevailing strong bear momentum, evident in four consecutive bearish candles on the weekly chart.
Furthermore, if bulls abandoned their positions at $70,000, it is unlikely they will immediately re-enter the market. A more plausible scenario is that they will seek to buy at the $50,000 level, which coincides with a Breakout Point, or near the Major Higher Low around $40,000.
Aggressive bulls may opt to buy with limit orders and gradually increase their positions, while conservative bulls might await a second reversal upwards from one of these levels. It is crucial to remember that the long-term trend remains bullish.
Finally, bears may find favorable selling opportunities if a lower high reversal develops from $60,000, the 20-week EMA, or around $65,000.
In conclusion, the Bitcoin market is currently experiencing a period of consolidation and potential bearish momentum. While this may present buying opportunities for bulls, caution is warranted due to the strong downward pressure. The long-term outlook remains bullish.
The Daily chart of Bitcoin
The daily Bitcoin chart has been characterized by a trading range since early March, a pattern we have previously analyzed by dividing the range into thirds. This approach highlights how traders typically buy in the lower third, sell in the upper third, and take profits in the middle third during range-bound markets.
It’s important to note that 80% of breakout attempts fail within a trading range. We had previously cautioned that after five or six unsuccessful breakout attempts, the price tends to extend its range, necessitating increased vigilance from traders.
We anticipated either a bullish breakout or a reversal downwards. The bullish scenario appeared easier to trade due to the presence of a breakout mode pattern at the top of the range, resembling a cup and handle formation. Conversely, the bearish breakout from the breakout mode presented a challenging sell opportunity, as it would have been initiated from the middle third of the range, a generally inadvisable action.
Ultimately, the bearish scenario materialized, resulting in the formation of a bear channel that broke out at the 200-day moving average and subsequently breached a lower low. At present, the price has retested the breakout point and the 200-day moving average.
For the bullish momentum to regain traction, bulls need to recover and sustain trading above these levels. Notably, bulls who entered the market with limit orders below the lower low could have profited by scaling in 3,000 to 4,000 dollars lower.
It’s possible that bulls will attempt to buy again 3,000 or 4,000 dollars lower, around $60,000, which aligns with a previous Major Higher Low on the daily chart. Conversely, bears may seek to sell around the upper trend line of the bear channel.
In conclusion, despite the last bear leg appearing climactic, the price could continue its downward trajectory. Bulls may require a second or third signal before re-entering the market. The most optimistic outcome for bulls now is likely sideways trading.
We encourage you to share your thoughts and opinions on this analysis in the comments section below. Do you agree with our assessment? What are your expectations for Bitcoin’s price action in the coming weeks? Let’s discuss and learn from each other’s perspectives. Please share this analysis with your fellow traders to spread the knowledge and foster a more profound understanding of Bitcoin’s price movements.
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