Last week we said:
The price action does not look good on any time frame after BTC failed to clear resistance levels last week. It is amazing how fast the market outlook can shift from Bullish to Bearish. That said, fundamentals remain strong and conviction in BTC over the long term remains high.
A lot of the downward pressure is due to BTC’s 0.9 correlation with the Nasdaq. The Federal Reserve has indicated its intent to raise interest rates on the dollar to nearly 3.5% over the rest of the year, and to tighten its balance sheet (currently over $8 Trillion in assets) – spooking traditional markets into a sell off. Given the 0.9 correlation, it’s natural that BTC would also sell off, as it’s essentially trading like a tech stock at this time.
Bitcoin confirmed our short to mid term bearish outlook, testing and breaking support zones. We identified the $40k price zone as support, which unfortunately failed after repeated tests throughout the week.
Let’s take a look at the charts and identify support and resistance zones for the week.
Bitcoin Price Analysis
We use the 4H Chart to identify short-term trends. Here we can see a bearish death cross pattern, as the 50 and 100 SMA has crossed beneath the 200 SMA. The price is trading beneath the 4H 50 SMA, which will act as resistance until it can be confirmed as support. Currently, this is trading at about $40.5k, which is our local resistance.
There is a glimmer of hope when looking at our momentum indicators. The RSI is definitely in the “oversold” zone, and the Stochastic is bottomed out – signaling that a reversal in momentum may be imminent on our short-term time frame. This means we may see a short-term test of resistance at the $40.5k level.
On the daily chart, we can see that the 50 SMA is actually trading > the 100 SMA thanks to the short-term pump we had two weeks ago. But since the price collapsed beneath both of these lines, it is almost certain that the bullish signal will be invalidated. I expect the daily 100 SMA to act as resistance at $42k. The line to beat as one of our main bull market signals is the daily 200 SMA, currently trading at $48.1k.
Once again we have a glimmer of hope when looking at the daily chart momentum indicators. The RSI is nearing an oversold mark and the stochastic is at the bottom of its range, signaling that we may see a relief rally soon.
Lastly we will take a look at our weekly chart to get a long-term TA picture. Here we can see that the weekly 100 SMA has been acting as a trendline support over recent months, as repeated retests have confirmed higher lows. This would be the third higher low in a row, if Bitcoin price holds above $35k, making it a key support level.
Our momentum indicators seem neutral overall. The RSI is neither overbought nor oversold, but the stochastic is reversing in the downward direction, signaling that we could see a return to the weekly 100 SMA to confirm support.
Bitcoin Investor Sentiment
Investor sentiment is at its lowest point in over a month, as traders are now in “extreme fear” territory. Generally, a good strategy is to trade against the overwhelming sentiment (using wise risk management, of course). As a wise trader once said, “buy when there’s blood in the streets.”
Bitcoin Fundamental Analysis
Glassnode reports that exchange supply is falling – showing that long term holders are continuing to buy and move BTC off of exchanges and into cold wallet storage. If this pattern continues, orderbooks will thin out to the point that we could see exponential moves upward in price.
There are bearish indicators on the 4H and Daily charts, but bullish divergences, solid fundamentals, and a bottoming-out investor sentiment could signal a reversal soon. The stochastic indicators show that a reversal in short and mid-timeframe momentum could be in play, potentially confirming a “higher low” for the third time in a row on the weekly chart.
Not investment advice. Do your own research.