L62327 3 minutes reading from Bitcoin

Bitcoin Chart Analysis: A Simple Guide to Choosing a Price

Here's a simple Bitcoin chart for you.

First of all, you can see that BTC is playing around the 50% Fibonacci traced from October 25th to the most recent top at 21K.

This is easy:

- full candle above the 50% line, expect a bullish continuation

- full candle below the 50% line, expect a bearish continuation

You can see that the short-term top is 21K and the short-term bottom is 19.2K

In the middle of the range, you have the 50-day SMA (the red curve) which is a strong line in any chart, and in this case, could act as support if the price goes down.

If the price is below the 50-day SMA and below the 50% Fibonacci, I usually say that's a lethal combination because it builds a resistance wall that is not easy to conquer.

For now, BTC is above the 50-day SMA and judging only by that you could say the price action is bullish...

BUT, on the 2nd panel it's the volume, and as you can see volume is in a clear downtrend.

You need to understand that volume is the blood of the market, without volume, no uptrend is sustainable and volume usually goes ahead of price action.

Translation: there's a bearish divergence between price action and volume, which of course, it's a bearish indicator.

Below that, on the 3rd panel, it's the RSI. You can also use the Stochastic, OBV or any other momentum indicator you like.

Here, the RSI it's just above the 50% level and it seems to be bouncing, but it doesn't seem to be a strong move yet.

The RSI bouncing on a 50% level is something pretty common, and a bounce on the 50% is not so important as the RSI crossing up the oversold level for example.

What I mean is that the RSI is "bullish", but weak, and if Volume is not following price action, RSI won't save BTC, because RSI is just indicating momentum, not trend.

Last, on the lower panel, you have the MACD, and you can see here it's completely bearish. It had a bearish cross yesterday, the histogram is bearish and there are no signs of a bullish cross yet.

So we have:

Price action with a shy "bullish" Volume is bearish. RSI with a shy "bullish" MACD saying bearish.

Diagnostic: Bearish.

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See you soon,

This post is based on this twitter thread.


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