Last week we said:
Price Analysis is bearish on all timeframes but some potential bullish divergence may shift the tide. Investor sentiment also appears bearish as fear is dissipating despite the flat or lowering market. Strong fundamentals may save BTC, and long term holders have retained their conviction and continue to accumulate.
At the time of our previous article, BTC was trading at about $46k and had broken below our key support level at the daily 200 and weekly 50 moving averages (near about $48k). We had said there was a bearish outlook but some hidden bullish divergence. Our prediction of a bearish outlook was correct and bears won the week – driving the price of BTC down as low as $40k.
Let’s take a look at the charts this week and see if we can predict BTC’s next move.
Bitcoin Price Analysis
Taking the long view on our 4H chart, we can see that the highlighted green zone represents a significant demand/buying zone for BTC. This was tested back in September, and BTC is currently bouncing upward from this zone after a successful test over the past week. This is what we call a “demand zone” and is placed at $40-42k. Below this demand zone, there is another at $29-30k.
Zooming in on our 4H chart, we can see that after BTC bounced up from the demand zone, it has overtaken the 50 SMA and is moving up toward the 100 SMA – which is expected to act as resistance. Currently, this is near $45k.
The daily chart still looks bearish, with an impending death cross probably occurring in the next week. However, we can see a clear bullish divergence with the 40-42k demand zone holding and bouncing.
Adding in our RSI indicator, we can see that BTC was oversold when entering the demand zone – which explains the strong bounce we are witnessing now. BTC is still slightly oversold, so the bounce may continue. It’s possible that we will see BTC’s price rise as high as the 200 daily SMA – located at $48k, which will act as resistance.
The weekly chart also shows some bullish divergence, with an RSI bounce correlating with the demand zone bounce. The weekly 50 SMA was previously support and will probably act as resistance upon the next retest – also located at $48k.
Bitcoin Investor Sentiment
Ever since last week’s drop into the demand zone, investor sentiment has been extremely fearful – indicating a good buying opportunity. With today’s bounce, we will probably shift into “fear” or “neutral” territory on the indicator.
Bitcoin Fundamental Analysis
Glassnode reported in a tweet that Futures open interest has reached new all time highs. With many longs already liquidated, most of this interest is in leveraged shorts. This push upward could cause a short squeeze, leading to short liquidations and rapid upward price movement toward our $48k resistance zone.
Bearish technical indicators but bullish divergence paints a hopeful picture for Bitcoin. A successful hold of the $40-42k demand zone is setting up a potential retest of the key $48k level for BTC – which represents both the daily 200 SMA and the weekly 50 SMA.
- $40-42k (demand)
- $29-31k (demand)
- $45k (4H 100 SMA)
- $48k (daily 200 SMA, weekly 50 SMA)
- $50k (psychological)
Not investment advice. Do your own research.