Bitcoin Technical Analysis
Yesterday’s low printed as follows:
- Bitstamp: $407.94
- BitFinex: $408.80
- BTC-e: $400.23
- BTC-China: 2,516 CNY
Weekly Bitcoin Price Chart
Looking at the long-term weekly Bitstamp chart, it seems like the decline could simply continue dropping toward zero. However, look at the indicators. RSI (middle frame) is reverse diverged – meaning the indicator low is not confirmed by price. Furthermore, RSI is touching its lower Bollinger Band. In the past, this had signalled the end of that wave of decline. Meanwhile, MACD (lower frame) is about to indicate regular divergence – as soon as price drops below $400. From a technical point of view, this condition is untenable.
Daily Bitcoin Price Chart
Similar indicator conditions are apparent in the daily chart.
MACD is diverged beyond salvation. Downside acceleration will not be able to pull the momentum out of divergence, and the only remedy is to reset the indicator by pushing it back to zero. This requires advance. RSI is diverged in relation to the previous downswing in mid-August. Daily RSI is touching its lower Bollinger Band and may pierce below it or retreat and touch it a second time. Either way, the downtrend is beginning to resemble a U-boat creaking under pressure at maximum depth.
4-Hourly Bitcoin Price Chart
Getting closer to the price action in a 4-hourly chart, we see that the indicators – specifically RSI – allow additional downside. The Fibonacci extension targets are shown, along with a potential decline path. Note the dotted grey declining trendline at the bottom of the chart. This is a long-term trendline that has acted as support in June as well as August. It will not let declining price action pass willingly.
Hourly BTC-e Price Chart
The hourly BTC-e chart shows that the indicators here are diverged and that this wave of decline is the beginning of the end. Note that decline to all the targets shown in the 4-hour chart above are possible but upward (or sideways) correction will be forced sooner or later.
When such correction manifests, its likely to return price to $420 or even $430 (Bitstamp) before plunging lower again. By returning to, and staying above, $480 the price action will signal the end of the decline since June.
Bitcoin Price Analysis Summary
Until we have confirmation to the contrary, assume that decline is in force. The first sign that decline has ended will be an advance back into the previous decline channel. Confirmation of advance will be for trade to break above (and hold above) the decline channel and the 4-hourly 200MA near $480.
Expect price action to get more volatile as bears and bulls tug for dominance in alternate upswings and downturns – each time achieving additional decline. Beware of a price spike to the downside in the leveraged exchanges. The indicators do not warrant relentless decline from present levels, so the largest players may seek to achieve it via stealth or surprise. Correctly sized buy orders between $320 and $300 on BitFinex could catch such a move. Remember to take into account any drawdown as a result of these exchanges allowing price to spike down to $160 or $80 (random examples).
Economic Data and Announcements
Yesterday’s US Philly Fed Manufacturing Index came in at 22.5 which was slightly below the expected 22.8 but better than July’s 22.0. Federal Reserve Chair Janet Yellen spoke without making much news – most media attention being focused on the Scottish referendum. US Building Permits printed at 1.0mil which signals a decline since July’s 1.05mil high.
Results have been tallied for the Scottish Independence vote and Scotland has, by a marginal “No” vote, rejected independence. The British Pound rallied as a result.
Canada Core CPI (month-on-month)
Saturday 20 September
G20 Meeting begins
CCN hosts a summarized Economic Calendar showing the week’s main data releases.
Updates to this article will be made during the European and US trading sessions should any significant events come to light.
The writer is fully invested in Bitcoin via BTC-e and Bitfinex. Trade and Investment is risky but not as risky as some other things out there. Take care only to take action in the market when you are 100% sure of the outcome. CCN accepts no liability whatsoever for losses incurred as a result of anything written in this Bitcoin price analysis report.
Images from Shutterstock.