Bitcoin price Bollinger Bands gave way today as price rolled over and dropped through a second support level to below $450. Additional decline is now a certainty and we look at some of the technical factors at work.
Bitcoin Price Analysis
Time of analysis: 13h00 UTC
Bitstamp 4-Hour Candle Chart
From the analysis pages of xbt.social, earlier today:
Bitcoin price is currently below the 4-hour 200-period moving average (red) that was identified as critical local support in analysis during this week.
The breach now opens decline to a long-term Fib line support that originates at the January 2015 low, annotated in grey.
The 4-hour chart’s indicators are tending to oversold territory and imply an upward correction before additional decline: the stochastics are beginning to group at their minimum (magenta circle), RSI is deeply oversold (blue circle), and below it MACD is touching its lower Bollinger Band. This combination of indications do not necessarily imply an end of decline, but merely a corrective pause.
Speaking of Bollinger Bands, the indicator’s inventor, John Bollinger, today remarked on the bitcoin price chart via Twitter:
Yes, that is a LOT of compression. Time to pay attention!
— John Bollinger (@bbands) May 18, 2016
As a measure of instrument aggregated volatility (whether price, electric current, etc), Bollinger Bands provide a visual measure of compression and decompression cycles that underlie whatever they envelop. As we see today, price had compressed into a consolidation and has subsequently made a breaking move to the downside. This fits with the larger timeframe analysis, presented during the past several weeks, that saw technical factors pointing back down in the chart.
Hopefully, the decline will be quick and only a correction that sets up the advancing wave that will take us beyond the tough resistance zone at $470.
Bitcoin’s price has broken out of consolidation after failing to conquer a thickening resistance zone below $470. We hope to revisit that area of the chart soon, and with greater market momentum. In the meantime, if the 4-hour candles begin closing below $450 and the 4-hour 200MA, we can expect to see $440, $425 and even the low $400s.
Many market participants may be wondering how decline could possibly be happening given Bitcoin’s positive fundamentals and pending reward halving event. We’ll explore the disconnect between price and underlying value in tomorrow’s report.
Bitfinex Depth Chart and Buy/Sell Volume
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Bitcoin price charts from TradingView.
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