Bitcoin price has spent the past 24 hours in a corrective price pattern below $410 (Bitstamp). Large buy orders wait passively below $404, but bearish chart bias implies the sellers could simply consume them, as had been the case during the past week.
Time of analysis: 15h00 UTC
From the analysis pages of xbt.social, earlier today:
The 1hr chart contains several indications:
1) MACD (panel immediately above price) is moving toward its zero line, implying another push higher. However, bear in mind that the MACD formula returns to zero even when price only moves sideways, so another high is not guaranteed. Traders should be prepared for the possibility with an eye to taking profit.
2) The stochastics (top panel) are ascending to their upper extreme – an indicator condition that, when fulfilled, will see the next declining wave begin.
3) Price has not yet reached the Fib extension target at $400 (orange arrow), hence we would expect at least another small wave down before a larger correction and then decline to the area of the blue rectangle. The blue rectangle includes the level of the 2.618 Fib extension target at $385, as well as a long-term supporting Fib line that is apparently enticing sellers.
Not displayed, the 4-hour and 1-day charts show no indication that the downtrend is complete – or even oversold. We can therefore expect additional decline, but in relation to points 1 and 2, above, traders should think defensively about the possibility of a push higher before decline resumes.
The bitcoin price chart is in a bearish technical condition in the 1-week, 1-day and 4-hour charts. This implies a large decline or, at least, a long-term consolidation. Immediate decline targets are $400 and $385 (in the Bitstamp chart).
The 1-hour and 15-minute candle charts have allowance for price to push back into the $410s, but only temporarily, since the influence of the larger timeframe charts takes precedence.
Orderbooks are strange expressions of future hopes and intention. Interpreting orderbook content and depth is an endevour prone to assumption and subjective interpretation, as illustrated below.
In their analysis of orderbooks, traders often express a strange conceptualization of the meaning that can be ascribed to the content and structure of an orderbook. The understanding (or conceptualization) is often an inversion of what the orderbook is actually revealing about the psychology of buyers and sellers.
Consider the cumulative Bitfinex depth chart below, and the “wall” of buy orders built down to $400. At first glance it may appear that $400 is where the bulls have made a stand and intend to establish their Buying Power as an intimidating barrier.
Yet, there are no labels that distinguish bullish buy orders (for long positions) from bearish buy orders that seek to take full, or partial, profit on existing short positions.
Seen from this perspective, it is difficult to know the exact intention of a buy order or group of buy orders. All we know, for sure, is that a limit order in the market is passively waiting to be consumed by an active market order in the opposite direction. For example, in the present market’s depth chart, the buy orders are waiting to be consumed by active sellers who are entering the market with direct market trades.
Put another way: if your intention is to trade in the direction of trend you don’t go and place a limit order on the other side of trend and hope price reverses (against the trend) back to it. No. Your intention and confidence in the direction of trend means you look for liquidity close-by and buy or sell the amount of contracts/bitcoins you want with an order executed “at market” price.
This kind of proactive mentality is being displayed by sellers. The buyers are displaying passivity: whether a sideline bull waiting for a seller to open his long position, or a patient seller waiting for other sellers to close his short position (already in profit).
The bears, the active sellers, are currently in control and are moving the bitcoin market. The content of the orderbook – other than providing liquidity for sellers – does not tell us anything about the camp (bull/bear) or the intention (open/close) of individual (or groups of) orders.
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Bitcoin price charts from TradingView.
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Last modified (UTC): March 19, 2016 19:32