Bitcoin Forms Bullish Bias After Days On The Downside
I would like to start off by following up on the last Bitcoin article I wrote. It was on a weekly scale and I plotted a continuation pattern known as a bullish pennant. I have adjusted the pennant line to account for the last four weeks. The dotted white line is the line I drew in my previous article. The solid white line is the adjustment I made. This adjustment is acceptable and still satisfies the criteria for the bullish pennant continuation pattern. However, this will be the last adjustment I make. Typically, a pennant pattern can last 1 to 12 weeks, but at 8 weeks it can be pushing it. After 8 weeks the pattern becomes less reliable and can be classified as a different type of pattern. This week's candle is week 9 of the pennant pattern. I based the solid white line on last week's low (i.e., week 8; June 29th, 2020). Should this week's close break the pattern, I will drop the pennant formation and consider an alternative analysis. For the remainder of the article I will discuss the daily chart.
The bullish pennant continuation pattern adjustment
The daily charts
Since my last Bitcoin article using the daily chart on May 29th, 2020, price has only fallen -2.24%. Essentially, price has been moving horizontally. Today, price has created a red candle that has engulfed yesterday's candle.
Price only down about -2%
Price was sitting above the 20-day moving average (MA; red) as of my previous article. Price rode it for a few days before breaking down below it and using the 50-day MA (orange) as support. Price then broke below the 50-day MA and tried to fight its way back over it, ultimately unable to do so. Then the 20-day MA crossed below the 50-day MA which is a type of death cross. Since then price has struggles to find its way above the two MAs. Price currently sits below both the 20- and 50-day MAs.
Price sees resistance at 20- and 50-day moving averages
The Bollinger Bands (BB) tell a similar story given the middle band is a 20-day moving average. The only other piece of information I can gather from the BBs is that price has been relatively stable, remaining within the boundaries of the upper and lower bands (white). Therefore the upper and lower bands are so tight together and moving horizontally with a slight downward trend.
Price relatively stable in the last 3 weeks
Price continues to test the 50% retracement level of $9,820.5. While price has moved and closed over it, it has been able to remain establish it as support. This trend appears as far back as October 2019. Typically, the more the area is tested the more significant the area becomes. This is because other traders notice this area and make decisions based on the observation. This 50% retracement area from the all-time-high seems to be just that, a significant area.
Price remains below the 50% retracement area of the all-time-high
The heikin-ashi technique shows that price has a series of downtrend moves since the start of June 2020. Currently, price began to develop an uptrend with the last three candles. However, the current candle is neutral with a bullish bias.
Price is neutral with a bullish bias
On Balance Volume
The On Balance Volume (OBV) has been bearish just like the heikin-ashi showed. However, it looks like the OBV is balancing out there in the last four weeks. Currently, the OBV has yet to make a lower low. Given price is neutral at the moment this can go either way. Let's remember though that the heikin-ashi is showing a bullish bias. OBV could make a higher low.
The On Balance Volume is settling
Chaikin Money Flow
Similar trend with the Chaikin Money Flow (CMF). However, the CMF has a clear bullish bias. It was supported at the zero line and has made high highs since the low in the last week on June 2020. It is also currently pointing upward. Based on what I have seen so far, Bitcoin is shaping to look bullish. It is to early to be certain, but it looks that way to me.
The Chaikin Money Flow is looking bullish
The MACD shows a similar trend as the last two indicators, a downward movement. However, just like the Chaikin Money Flow, the MACD is starting to turn bullish. That is the signal line (blue) has crossed over the MACD line (red), the histogram is in the positive range and both lines are pointing upward towards the zero line.
The MACD points upwards toward the zero line
By the looks of the chart itself one might say that price has been moving sideways. This might look especially true given only a -2.24% drop since the end of May 2020. The moving averages and the Bollinger Bands show a similar sideways trend. However, the heikin-ashi technique exposes that indeed Bitcoin has been on a down trend the start of June 2020. This downward trend is also evident when looking at the history of the On Balance Volume, Chaikin Money Flow, and MACD. In this last week though the indicators are shaping up to a bullish bias. Although the trend has yet to be established, I see the foundation being formed.
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