Bitcoin price has fallen below critical support – the 1-hour chart’s 200-period moving average – and invalidated our expectation of one more advancing wave. The current chart setup is bearish but prudent traders may want to wait before positioning aggressively short.
Bitcoin Price Analysis
Time of analysis: 14h43 UTC
BTC-China 1-Hour Chart
From the analysis pages of xbt.social, earlier today:
Considerable annoyance at the market’s failure to meet the precedent pointed out in yesterday’s analysis… as was illustrated price had not, on any previous occasion, failed to touch the 1-day 100MA once it had entered the 100MA’s 10% envelope from below. Yet, this seems to be exactly what is happening in the chart.
Overnight, price has dropped through the 1-hour 200MA – our first bellwether for decline. Additionally, price made the drop below an xbt.social sell signal that has penetrated below the 1-hour 200MA.
The combination – of not making its usual target at the 1-day 100MA, as well as a powerful sell signal – is bearish. We have been expecting the larger decline to resume but there is an argument to be made that this is not yet the moment to go short. It is illustrated in the chart above.
The wave count switches to the alternate that has the corrective top at the recent high of wave C and the subsequent price action as the beginning of decline.
Note that the momentum indicators, RSI (second from top) and MACD (bottom), have reverse diverged strongly on the overnight plunge. Their low for the plunge extended below their indications for the price low in the left of the chart.
The argument being presented is that the large reverse divergence should have price draw sideways before stronger decline sets in. The indicators had formed a regular divergence on the most recent low and the xbt.social stochastics (top) are flashing repeated blue divergence dots – this reinforces the view that bitcoin may make its characteristic “sideways-then-drop” declining price pattern.
Be aggressive in a trending market and conservative in a choppy market. – Vadym Graifer
Given that we still face a day or two of sideways price action, it would be inappropriate to open short positions right now – despite the presence of a strong sell signal. The conditions outlined above seem sufficient to expect a consolidation above $230 / 1480 CNY prior to the onset of additional decline.
Bitstamp orderbook depth and Buy/Sell Volume:
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Bitcoin price charts from TradingView.
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