Bitcoin Market Update #2
It is already time for a new market update. Number two, in a row of more to come. A new weekly close and several other new developments happened since the last update. Let us also see if my last update and summary aged well within the last seven weeks.
Before we jump straight into it I reviewed my first market update and found that the long blocks of text might discourage some of you and more importantly what are you reading it for? You want to learn what is Bitcoin up to and how does the market currently look like in a quick glance.
For that reason I will restructure my market updates into different section for metrics I am looking at in technical analysis and summarize those findings in a shorter way.
As we are doing thistogether here , feel free to drop me your feedback down below or in a DM. Looking forward to evolve with you!
Weekly
Now let’s get started and analyse what the weekly chart tells us.
Market Structure
The market structure is still intact and it did not change a lot from last week. We will most likely close lower and mark a new low within the correction phase we are currently facing. Only a close below $43k would change the complete picture here with a lower low, but I cannot see it yet. Sunday close will tell us. If it happens I will keep you updated on my view on it.
Momentum
The RSI is dropping close to an important trend line, that started in early December 2018 and since then has never been broken. Latest touches of this trend line always marked a reversal for Bitcoin and lead us to new highs.
But we can also observe factors opposing this option. The 9SMA and 45EMA of the RSI (green / orange lines) are bear crossing right now, which usually is a bullish sign for the momentum. Additionally, the recent highs for the price where not represented by the RSI. Meaning that the momentum for the upside was not sustainable.
To sum it up, the weekly picture remains bullish based on the market structure until it might break. The momentum has some arguments for a potential reversal within the next weeks, but remains uncertain. The upcoming holiday season and low volume associated to it might blur the picture even more. We need to wait it out and see if we have a reversal on a weekly close for the RSI within the next weeks.
Bitcoin Weekly Chart for Coinbase
Daily
As we are facing an ongoing correction with a good amount of uncertainty and opposing signals from the weekly let’s have a look on the most important time frame, the daily.
Supply & Demand
Since we went into correction mid-november we identified a supply zone around $68.000 for Bitcoin. If the meaning of supply and demand zones are things you never heard of, my next article will deal with the concept of it in detail. In short, prices are determined by supply and demand a basic economical concept. In technical analysis we can identify areas areas of strong/large supply and demand, meaning that once the price reaches one of these areas many people are willing to buy or sell.
For example, the wick on the 4th of December got into in the demand zone and supply got immediately bought up by the high demand and even closed way above it again. S/D zones are often considered being zones of reversal and strong support or resistance for a price.
Currently the price is ranging between two major zones of supply and demand (see on the chart) and a minor zone that might flip in the short- to mid-term, but for now acts as resistance. Meaning that Bitcoin, is trapped between $55k and $40k for now. This is also our starting point for our outlook on the days behind and also ahead.
Directional Bias
As mentioned we are currently ranging within a phase of correction between zones of supply and demand. Starting of December 3rd my DBIs flipped to red and since then my general outlook is bearish for the given time frame and remains unchanged since then.
Momentum
Looking at the candles of the last days, price deflections become less and less. The bearish momentum seems to cool off a bit currently. Similar picture on the RSI where we even see a bullish divergence over the last few days, while prices are marking lower lows we can see the RSI printing higher lows.
Similar Picture on the FSR with a more bullish structure and the red momentum background color also stopped being printed, usually marking a local low.
A falling wedge, as you can see on the chart, is another indication of a loss in bearish momentum. A falling wedge is a chart pattern associated with reversal of price action. in bull markets as a continuation of the generals trend, in bear markets as a potential relief rally.
Summarizing our analysis, we are still in a phase of correction, but the momentum is slowing down for the moment and might has the potential to turn around. No way, I am calling it a bottom here only time will tell us. Something I would like to see for more confidence could be the following:
Wick down into the demand zone with a close within the lines of the wedge
A break out of the wedge formation with a successful retest
For a change of tone, Bitcoin needs to build a bullish market structure (higher highs and lows) and successfully break above the resistance around $56k.
Bitcoin Daily Chart for Coinbase
Four-Hour
Before we finish this weeks market update, we need to look on the four hour chart. A time frame I will focus on frequently in my updates, as it is my go-to time frame for trading and next to the daily the most mentioned within crypto. As you can see on the chart below I added one additional indicator right into the price chart. This is my own indicator, called “Momentum Striker” that indicates me potential entry signals (Long / Short). The colored candles (beside the normal green/red ;) ) signal a potential pivot and temporary turn around for the price action. If you want to learn more about my indicators just comment below or drop me a message. Currently I am considering a publication of my indicators to the public.
Directional Bias
As my directional bias in mainly influenced by the daily and weekly time frame, it is bearish for me on the 4h as well.
Market Structure
The market structure is mainly characterized by lower highs and lower lows as well, but since the drop on the 4th December the price is mainly ranging between a low time frame area of supply and a support line based on the lower end of the bodies of the candles beginning as well on the 4th of December. A line we lost shortly yesterday, but regained today with a potential pivot. Bringing us back into the range for recent price action.
Momentum
We identified a bullish divergence on the FSR. RSI climbing above the 9SMA and 45EMA if we close right here.
In summary, the loss and immediate regain of the range combined with a bullish divergence and a RSI on the rise could be a sign for an attack on the 55EMA (white line) based on the price or even the zone of supply around $52k. Nothing I would currently put a trade on, as my directional bias would not support it, but what I am observing analyzing the charts could indicate a reversal within the range.
As you can see my indicator only signaled for Shorts lately and as long as my directional remains red and not green I will stay flat and only take short term scalps.
4 Hour Bitcoin Chart based on Coinbase
#TLDR - Summary
To wrap things up, we are still in a correction based on my analysis. My directional bias remains bearish for the short-term to maybe mid-term. Nevertheless, we can find signs for potential strength or a change of tone here:
Falling Wedge formation on the daily
Bull Divergences for the RSI and FSR on several time frames
Weekly trend line for the RSI not broken and close for a retest
Crypto Twitter sentiment is very bearish
Spot volume for Coinbase is basically unchanged, but increased slightly over the last weeks since we started the correction. Based on this no clear sign for reversal yet.
What does that mean for my trading, as mentioned for the 4h chart, my only approach to the current situation are scalps on the short side of the market. I am currently not entering any long positions . If the market reverses I will most likely miss the first 10-20% of the move until my directional bias changes, but getting in later with higher confidence and confluence pays out over the long run. Try not to catch the market, ride with the flow once you can identify it clearly.
What we learned from following Bitcoins price action, there is always enough room to wait for confirmation before jumping on the hype train. But there are also many who lost everything by guessing the tops and bottoms of the market.
I hope this will help you navigating through the week and stay tuned for my next update, which might be delayed by some days as it will be Christmas and I will take some days off to enjoy the time with friends and family.
I wish you all Merry Christmas! Stay away from the screens and enjoy your time with your loved ones. For those of you not celebrating Christmas, have a great time as well and I will be back right after the holidays here.
Have a great weekend all of you!
