Market Analysis

Bitcoin Resurgence

Bitcoin is back in the news as crypto currencies are seeing a major resurgence following the crash of 2018 following the run to $20,000 in early 2018. Given all the renewed excitement I thought it might be worth an unbiased technical look at the chart.

Full disclosure: I have no position in $BTC or any other crypto currency nor do I intend to take a position. I know there is a wide range of opinions about fundamentals, price projections, viability, etc. There are fans that think that the potential is unlimited, there are people that think it’s all a fraud and/or doomed to peter out into nothingness.

This is not what this post is about, it’s simply an unbiased look at a chart and I’m using a macro chart to highlight some observations. Frankly this is the first time in a year I’ve taken a look at a crypto chart, so fwiw, it’s a fresh look for me as well.

As I’m not involved in the day to day on $BTC, and am not trading it I’m using a big picture weekly chart and if my chart here is of use to you then great.

Here’s the chart and then some thoughts:

The first observation is not technical, it’s more of a seasonal observation. In recent years $BTC has shown rallies to emerge following the early April time frame. Sometimes these rallies produce new highs later in any given year or these rallies peter out. This year so far is following the seasonal script of a post early April rally, so in context of its history this rally here should probably not surprise.

Now to the technical.

$BTC has respected multiple trend lines over the past few years.

On the left side $BTC created a top trend line in 2017 connecting to 2014 which was subsequently busted through when $BTC went on its vertical move in 2018. Normally I would view this trend line as no longer valid, but this trend line reasserted its relevance as it became clear support after the initial crash following the move to $20,000. That support ultimate failed and then turned into resistance later in 2018.

The bear market in $BTC was so pervasive it also broke $BTC’s support trend line dating to 2015 in late summer of 2018. This previous support trend line is now being approached by $BTC and the trend line currently resides around the $8500/8600 zone. Note the trend line is rising and values will change over time.

This trend line may prove to be resistance on any further advances at this stage.

To summarize the state of these 2 trend lines: $BTC remains technically broken in regards to these 2 trend lines and $BTC will have to sustain a cross above the previous support line to confirm the bullish case.

That said $BTC also had formed a bullish wedge over the course of the past year. This bullish wedge was crossed with the early April rally. As the wedge is very large the current rally is technically justified.

Should $BTC retrace sizably in the weeks/months ahead a retag of the upper wedge trend line may tune out to be a technical long entry point. But that trend line is declining steeply and such a move may be viewed as a crash as its pointing to the 2018 lows.

I’ve included some fib levels on the chart as well.

$BTC has crossed the .236 fib with vigor and a retest may also prove to be support. In context of the size of the 2018 decline the current rally has yet to reach a proper technical retrace of the 2018 range, this implies that tests of higher fibs in the future are possible. The next larger fib is at 9657, but to get there $BTC has to recapture the broken trend line ahead.

However there’s an alternate bullish path for $BTC and that is a slowing of the current advance that would allow it to tag the broken trend line from its underbelly and advance more patiently toward the apex of the 2 larger trend lines. That apex resides at 11647 and incidentally coincides with the 0.5 fib. The apex concludes near the end of August 2019.

The main message here: $BTC does necessarily need to cross the broken trend line, it can get to it if it moderates the speed of the advance.

However tagging the trend line and failing there could imply a bearish rejection of size, hence watching the trend line and observing any price reaction there may be of great interest.

If you’re umber bullish $BTC you may like the potential of a 1.618 fib tag if the rally can manage to get above the larger apex. That fib resides at 30496, but it is only a serious consideration if $BTC can sustain a move above all time highs.

But first things first. $BTC is getting close to a major trend line and has to prove its case there.

For now $BTC has shown 2 things: 1. It has followed its seasonal pattern and produced a rally following that script. 2. It has acted technically by breaking above a bullish falling wedge.

Now it needs to prove its case by showing a positive reaction in dealing with the trend line above or risk a sizable reversal.

There, that’s what I see fwiw. I wish everyone trading/holding it the best of luck. And since I’m known for the occasional sarcasm, let me clarify I really mean it: I wish everyone the best on it. Good luck!

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Categories: Market Analysis

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