Bulls have managed to score quite a coup, confirming our suspected inverse head-and-shoulders bottom.
Yesterday’s surge was on high volume intraday, with most of the move happening in two hours. A look at the daily chart shows that volume-wise these are still early adopter eager-beaver bulls rather than the whole market turning bullish yet.
This move has had a couple of significant effects on the picture:
- It’s moved the action back above all of the major support bands that it had fallen through (turquoise). Bulls can breathe easier – temporarily at least. Saying that, there is significant overhead resistance just above at $7750 and $8200 (red dashed), and of course the big one – the 200 day moving average, currently at $8895.
- It’s pushed BTC over the 50 day moving average (blue) for the first time since April.
- Overnight, BTC responded to resistance around $7700, confirming the underside of an arguable uptrend from the lows (blue arrow). We can add a complimentary downtrend, putting the action this year within a symmetrical triangle dating back to February (pink here).
- With symmetrical triangles, volume is essential to confirm the ultimate conclusion (up or down). A common scenario is a fake-out in one direction followed by a higher-volume conclusion in the other.
The red arrow shows the volume as we left the triangle downwards; while decent, this wasn’t earth-shattering, so if bulls manage to get above the resistance lines AND the 200 day moving average AND better this volume, it’s possible that the recent move down will be proven to be a head fake.
But that’s a big but. There are a LOT of headwinds above for bulls to pull that off, especially when daily volume isn’t really on their side yet.
- Alternatively this could simply be a retest of the triangle from below, before a continuation down.
This isn’t a situation to make a strong call in, the market has some decisions to make and there are some bull/bear battles to be had. Until proven otherwise I’m still seeing this as noise within a bear market. I’ll add commentary at any important junctures.
One last point – it’s always good to remember basics:
We’re not in a bull market until the 50 day moving average (blue) is back above the 200 (red). We’re a way away from that yet.
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