For the third day running the Bitcoin price has been skimming along the top of the descending trendline that has now entered the upper $460 price level. With a confluence target defined at $460, both time and indicator capacity are running out. Bird's Eye View…
For the third day running the Bitcoin price has been skimming along the top of the descending trendline that has now entered the upper $460 price level. With a confluence target defined at $460, both time and indicator capacity are running out.
Today I’d like to briefly step away from the immediate price action (analysis is posted below this section) and take a high-level view at the Bitcoin chart for the broader insight such a longer term perspective provides.
The recent decline from $600 had been strong – as strong and as steep as any sell-off we’ve witnessed this year. The fact is, that unlike previous similar declines, the downside action from $590 to $440 failed to establish a new low. It is also evident that the decline has, since, lost momentum. One can argue that the current sideways action is merely a consolidation before plunging lower, and we have defined targets all the way down to $160 if decline wants them.
However, the prospect of continued decline warrants the question: “Decline to what level?” Taken to its natural conclusion decline can be seen to change its character as it moves through three pragmatic phases:
The Bitcoin market decline since November last year has, arguably, witnessed all three phases more than once. Of course, during the unfoldment of the smaller waves (that form the components of the largest waves of decline) the same three phases play out again. The same is true for the component waves of advance into a new rally, and this is the basis of the view that market waves manifest the group psychology of all market participants.
At the largest degree, the market seems already to be in an established uptrend – since April – check for yourself on the chart above.
Shorter term, the market is currently in a smaller degree downtrend and in the process of making a local low. In the coming days it’s likely to dip lower – to $460 or $412, yet, neither of these levels will qualify as a major decline low. Achieving these lows will most likely be the result of market short selling by opportunistic traders taking advantage of the current wave down. It cannot be the result of Profit Taking since the appropriate time for that was above $600. Nor can it be Panic Selling – the market had already sold off to the $440 level where the majority of participants had bought into the market in mid-May. What remains is Bargain Buying and, hence, the opportunism of the last two weeks’ trade – underpinned by calculated technical actions in the chart.
We’ve also witnessed, during the past two months, that neither positive nor negative news announcements have had any expected effect on price. Instead, the Bitcoin price has adhered strictly to long-term trendlines, moving averages and chart indicator signals as they regain composure after the titanic correction that unfolded from November 2013 to April this year.
Across all exchanges, the Bitcoin chart can be seen to be regaining equilibrium. Looking at the BTC-China daily chart above, we can see that, despite Bitcoin holders’ persistent fear of continued decline, price has been making higher lows for almost five months. If the present decline reverses meaningfully from a higher low above $400 then we can declare the decline over. However, uncertainty only loosens its grip on the hearts of the majority well into the third wave of a rally and, therefore, additional sell-offs will happen as the advance slowly makes its way back above $600.
Given that uncertainty persists – and that it will pull the advance back on several more occasions – now is not a moment for over-exuberance. Instead, be patient like a lion. Waiting for the right opportunity. Build your long position gradually over the coming months by buying at the lows – and take care to always preserve some capital for additional purchases when sell-offs unexpectedly dip lower into bargain levels below $500.
Nothing material has changed since yesterday’s analysis. Price action only confirms the market’s attachment to the lower decline channel trendline, shown here on the Bitstamp hourly chart.
At the time of writing, just prior to the European market session opening, the Bitcoin price is trading back toward the lower trendline, currently cutting through $467 straight down.
Updates to this article will be made during the European and US session should any significant changes come to light.
View our Bitcoin Price Chart here.
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.
Last modified: February 12, 2020 2:35 PM UTC