After Bitcoin dived into deeply oversold territory following its collapse on Black Monday, massive unwinding of short positions has taken place thereby lifting the price substantially. Bitcoin is trading at $224.05, up more than 8 percent.
In the previous Bitcoin price analysis Black Monday, it was said that a relief rally would occur sooner which should be used to create short positions. Therefore, if the Bitcoin price nears its previous top of $235, create bearish bets by placing a stop-loss above it.
Take a look at the latest technical considerations below.
Bitcoin Chart Structure – As can be seen from the daily BTC-USD chart above, Bitcoin had pierced the important floor of $220. Now, the cryptocurrency can be seen flirting above this level but I am expecting the previous sell-off point of $235 to play spoilsport again. Bitcoin has been maintaining a lower top, lower bottom structure since the mid of July, and it is expected to continue.
Moving Average Convergence Divergence – While the decline in MACD has been abated temporarily, the Signal Line is still plummeting. The latest value of MACD is -14.3633 while that of the Signal Line is -12.0293. The Histogram can be seen erasing the losses and is now at -2.3340.
Momentum –The Momentum indicator has shown a sharp rise in its value, from -54.4600 to -32.0600.
Money Flow Index – The MFI has advanced to 30.7004.
Relative Strength Index – The 14-day RSI value is now 34.5307.
The relief rally in Bitcoin may fizzle out very soon. Therefore, market participants should be prepared to create short positions now and on higher levels by placing strict stop-losses. The highly volatile conditions demand that deep stops be placing when making trades.
Only high-risk traders should consider buying Bitcoin if the price slumps to sub-$200. Maintain a risk-reward ratio of 1:2.5.