Last week we said:
BTC is gaining strength as it consolidates around the key $30k zone. On our mid and long term timeframes, a relief rally seems to be approaching. We could see a short-term flush to reset the 4H RSI and Stochastic before springing up. Investor sentiment continues to indicate that we are near a range-low, and fundamental strength / adoption show steady growth.
BTC continues to range in the same consolidation zone as last week, bouncing between $28k support and $30.7k local resistance. At the time of writing, BTC is currently trading at $30.7k – our exact local resistance zone. Could a break out be in the cards?
Let’s take a look at the charts and see if we can predict BTC’s next move.
Bitcoin Price Analysis
On the short-term 4H chart, we can see that BTC has broken out above the 50 and 100 SMA. Both of these averages are sitting around $29.5k, which will act as support in the event of a retrace. The 4H 200 SMA will act as resistance if BTC breaks out above the consolidation zone – currently at $32.6k.
Our momentum indicators make it unlikely that we will see a significant breakout to the upside. The RSI is heavily overbought and Stochastic shows we are ready for a move down. If BTC does in fact break out to the upside, I do not expect it to break through the $32.6k resistance.
On the daily, moving averages are still bearish. The closest SMA is the 50, trading at $35k. This is the next resistance level after $32.6k.
The RSI is no longer oversold and is approaching neutral, but the Stochastic is on a downtrend. BTC’s relative flat price action despite rising RSI means that it will be overbought at a lower price – a bearish indicator.
On the weekly, RSI is still looking heavily oversold and stochastic is reaching the bottom of its range. We could see a slight relief rally, but the RSI may still go lower as it did in the 2018/19 bear market during its final capitulation.
Bitcoin Investor Sentiment
Investor sentiment remains near record lows, as the global economic outlook is bleak. Normally these are good times to average into new positions.
Bitcoin Fundamental Analysis
For the past several months, BTC has been tracking the Nasdaq index – essentially trading as a tech stock. This past week, BTC has decoupled from its correlation with QQQ, but not in the positive way most were expecting. Many analysts have been calling for a relief rally in traditional markets – which indeed materialized this past week. QQQ rose 6.5% over the last trading week, but Bitcoin was left trading flat or down. This shows a fundamental weakness for BTC. If traditional stock markets experience a sell off this week, BTC could also sell off – sending it to a lower low. Traders should take positions with extreme caution.
BTC failed to rally with traditional markets this past week, losing its correlation with the tech sector of the stock market. Technical indicators look bearish on the 4H and Daily timeframes, but on the weekly we are starting to look ready for a recovery. There could be one more major dump before this rally occurs, however, as the weekly RSI still has room to dip before meeting 2019 bear market lows.
Not investment advice. Do your own research.