The bitcoin price chart fell through another level of support earlier today, but is clawing its way back to $600. How will we know if the next upward wave is advance or merely a correction? The 1-day candle chart indicators give us clues.
Bitcoin Price Analysis
Time of analysis: 13h00 UTC
Bitstamp 1-Day Candle Chart
From the analysis pages of xbt.social, earlier today:
After last night's post price rapidly made its way down to the 4hr chart's 200MA at $585 (Bitstamp), spiked below it, and is currently attempting to regain $600.
The OKCoin 3month futures contract 1-day candle chart is shown, for the reason that it shows leveraged trading and, therefore, exaggerated price waves. Even so, the waves conform to a channel of development (blue trendlines) that will be useful support and resistance gauges as the decline bottoms out in the coming days.
Firstly, note the location of the 200MA (red) as a support at the bottom of the channel. Traders should watch this MA for support. The behavior of the market at the 200MA will reveal a lot about the state of trend: consolidating above it and then advancing, should retarget $700. Skirting across it or breaking below will put question marks over the notion of ongoing advance. The latter outcome seems unlikely but we bear it in mind.
As for a return to advance, notice the magenta circles annotated on the MACD indicator. Significant waves of advance had all started after the point when MACD had settled on its lower Bollinger Band. MACD is currently very far above its lower Bollinger Band and the implication is that we could see an intermediate correction prior to the next larger wave of advance. Compare to the November 2015 consolidation after the final rally of the year: MACD had not settled on its lower Bollinger Band and the December advance (a B-wave) was therefore doomed to fail until MACD completed its oscillation cycle. A similar dynamic could play out in the coming weeks and months.
Additionally, advance typically proceeds only from a decisive grouping of the stochastics (top) at the bottom of their range. Until we see this indication, we don't commit large positions to advancing waves.
Price has broken the 4hr 200MA, and the sentiment expressed here on Monday - that it would be a surprise to see full-blown decline - has now resulted in the full-blown surprise of the analyst. What's more, if the 4hr 200MA at $585 (Bitstamp) gives way, the $500 and $450 levels are wide open to ongoing selling. At some point in the coming days an upside B-wave should relieve the decline, but as explored above, we'll know from the 1-day indicators when the real advance is underway.
Bitstamp Depth Chart and Buy/Sell Volume
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Bitcoin price charts from TradingView.
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