Published 4th August 2019
Volatility remained high over the month as bitcoin price corrected substantially from the February-June rally. The price created two lowest highs around 13,000 and 11,000 as well as two other lowest lows, a double bottom (at least a local double bottom) around 9,200. This confirms we entered a bear trend in July representing about a 35% price drop from the 2019 highest point at 13,800. Even though this may look like a gigantic price movement, Bitcoin has often corrected in the 30-40% range during the 2015-2017 price rally. The price of an asset cannot indefinitely appreciate: “What goes up must come down” (at least some of it). Furthermore, the February-June rally has been very brutal with parabolic moves rarely seen so quickly after a lowest low.
The highest level of fear (see the Fear and greed index: https://alternative.me/crypto/fear-and-greed-index/) for quite some time has been recorded on July 15th with the index dropping as low as 15 points. We need to look at values prior to February 15 when Bitcoin was recovering from a strong sell off to find lowest values for that index.
A double bottom typically is a bullish sign since sellers do not manage to push the price further down/buyers are satisfied to pay the price to enter the market and we have seen a small rally starting at the end of July. Are we going to break through 11,000, 13,000 and 13,800 to resume our bull trend from earlier this year or is the price going to hit some resistance soon and drop back to the 9,000 level or even lower? Many indicators such as the stochastic RSI, the Fear and Greed index are showing a spike in optimism which in our opinion came to quickly (we have only seen the price surge by about 20% in less than 8 days consequently such optimism is not grounded). Apparently many traders are being impatient and cannot wait to see the price flying up again! The market often punishes such behaviour and a sharp fall to the 8000 levels could happen shortly after many traders have started opening long positions. We have had a golden cross (Moving average daily 150 and 600) which typically has indicated (a few weeks in advance) the start of a bull market in the past.
Weekly (W) Analysis
Analysis
No resistance until 13,800 (2019 highest point) then 16,000 (red line at 16,217)
Strong support around 7,500 – 6,700 (resistance zone (previous prices), golden cross (cross of the Moving average 21/85 representing daily 150/600))
Resistance and Support:
We temporarily broke below the uptrend line (violet line) which was acting as support and could be acting as resistance if we break back below.
We are quite far from the Moving average 21 which has acted as resistance in previous bull markets and is a good entry point for longs.
Daily (D) Analysis
Analysis
We are favouring short term short positions as we see many resistances.
The stochastic RSI is very high (overbought) and currently forming a bearish cross typically indicating a future decline in the price.
A quick move to the 9,000 and definitely the 8,000 levels could be a good entry point for long positions.
Resistance and Support:
- 12,000 (light blue resistance line)
- 11,200 (violet upward trend line)
- 10,900 (blue resistance line)
Strong support around 9,115 (green line/double bottom)
Strong support in the 8,200 – 7,600 area (previous price range + Moving average convergence/golden cross)
4 hours (H4) Analysis
Analysis
Many resistances, we favour a short term short position.
Resistance and Support:
- 11,800 (light blue resistance line)
- 11,300 (violet upward trend line)
- 11,129 (former local high)
Strong support around 9,115 (green line/double bottom)
Support with the green trend line currently at 84,010
Strong support below 8,100 as this is a previous price range + convergence of the green trend line.
Summary
We also consider that given the February-June rally the price should at least touch lower points than 9,000. In the short term, we are favouring the scenario of a price correction towards 9,300 and in the longer time frame potentially much lower, just under 8,000.
We do not see 11,000 as a good entry point for long a position as we would rather wait for a confirmed break of the trend line around 11,500 to open a long position with a limit order at 13,000. If the price confirms a break of 13,000 we would open a long position with a trailing stop loss starting at 12,600, a limit order at 16,000 and watch the break of 13,800. We would close the position with a small profit on rejection of the 13,800 level.
If the price drops below 10,700 we will open a short position with a stop loss at 11,100 and a limit order at 9,300. If the price drops below 9,000 we would open another short position with a stop loss at 9,300 and a limit order at 7,800.