Protests Around The World Make Bitcoin Ripe For The Picking
In this article, I want to look at the weekly Bitcoin chart. I typically look at the daily chart, but today I am switching it up. I also changed up my analysis approach in this article. You will notice I use more trend lines this time around. As of my last article, I suggested that Bitcoin was preparing to conquer the $10,500 area. I believe this is still valid. However, looking at the weekly chart gives a mid-to-long term perspective. Therefore, the price action history appears different to me as compared to my daily chart analysis. The charts and positioning of the price looks bullish to me in the mid-to-long term (4 months) but the indicators suggest there may be a few more weeks of volatility and horizontal movement. I expect with the current world environment, Bitcoin has a shot at forming a pennant continuation pattern.
Long Term View
Starting with the long term view, I plotted Fibonacci retracements at zero and at the all-time-high of $19,640.50. This places the current price right around the 50% Fibonacci retracement. Not only is this area exactly half the price of the all-time-high, it is also an area that has acted as support and resistance on several occasions. Currently, this area is acting as resistance. It also acted as resistance in the first months of 2020 and again in October of 2019.
Weekly chart with Fibonacci retracements
The 50% retracement area acted as support for a bit after the rally in early 2019. From June to September of 2019, this area was acting as support until it broke down. I want to remind you again that the 50% retracement area is half the all-time-high. That red circle I plotted in the chart below is the bottom of the all-time-high, which is a low of $3,148.50. In other words, Bitcoin price is up compared to the bottom. Specifically, price is up ~198%. From that low, price rallied ~339% to a peak of $13,849. Naturally, a correction is expected after such a rally and, of course, there was one. Price falls down from the peak establishing the lower trend line (white). At the start of 2020, price rallied from the 2019 low in December and reached a peak right at the 50% retracement area. This peak also established the upper trend line (white). Given this area has been important in the past, it it natural to expect some resistance. However, what was unexpected was COVID-19. This took price down near all-time-low level, or the 78.6% retracement level from the all-time-high. Amid COVID-19, shutdowns, mass printing of fiat currencies, and civil unrest, price has been rallying.
Weekly chart with annotations
In the chart below, I plotted a pennant continuation pattern. My thinking is, price hit near all-time-low levels, which allowed for accumulation. This accumulation is evident in the indicators below (I will discuss them later). Since May, however, price action has been slowing. I would also describe it as volatile. This volatility is what forms the pennant continuation pattern (the triangle containing the last five candles). As you can see, price has been following the white diagonal line (the hypotenuse of the triangle). At the time of writing, price has fallen and touched this line again. Should price continue this trend, I expect continued volatility within the pennant triangle for the next few weeks until, at the latest, a couple weeks into July. Should the pennant continuation pattern form, price may reach up to the $15,000 area. Keep in mind though that it could take another four months for it to play out.
Pennant continuation pattern
Although the current candle in the chart above is red and price has dropped in the last few hours, the heikin-ashi chart is showing a neutral pattern with a bullish bias. Given the previous trend was bullish, it appears momentum is waning. Naturally, I would expect a downtrend to take place as a correction to the recent rally. This will not be surprising to me. However, I am keeping an eye on this weeks candle to see if it continues to hold on to its bullish bias.
On Balance Volume
The OBV is pointing down after making a higher high. This indicates to me a downtrend is on its way. I will be keeping an eye on the previous low. If a lower low is made, the pennant continuation pattern would likely be broken. If price remains within the pennant, the OBV will likely make a higher low.
On balance volume
Chaikin Money Flow
The CMF is showing that selling pressure has been increasing since about week three of April 2020. I will be waiting to see if the if the CMF makes a higher low or a lower low. Given that the CMF is also pointing down, it confirms the suggested trend of the OBV.
Chaikin money flow
The MACD line (blue) is well above the signal line (red). Generally, the MACD has been bullish. However, the current histogram is showing a lower high. This to me also indicates a down trend approaching.
My four month long-to-mid term analysis is bullish. In this article, I plotted a pennant continuation pattern, which is a bullish pattern. Currently, price has seen slowed momentum after the rally from the COVID-19 low in March 2020 but has formed the basis for a continuation pattern. However, as of writing price experienced some volatility. This volatility is exactly what I expect for the next few weeks, along with horizontal movement. The price hit $9,093.5 as of writing, which still fits within the pennant (see image below). While the indicators suggest a downtrend on the way, the pennant pattern I plotted would not allow for price to drop very much. With that said, for the pennant to remain in play, it must be assumed that the current volatility is testing the market. If the market reacts badly to the current price action, the pennant pattern may be out of play, and a larger downtrend pattern may form. In a worst case scenario, I expect the correction settle around the ~$7,500, or 61.8% retracement area. However, I am also keeping in mind the current times. Protests around the world make Bitcoin ripe for the picking.
Pennant still in play
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