Bulls 1, Bears 0,
Bitcoin made an impressive run starting at 6 p.m. EST yesterday using the $11,500-$11,600 area as support. Over the past few days the $11,500 area was tested on numerous occasions and held its ground. The longer it held the more positive price divergence was shed off on the MACD leading to a negative crossover as it traded in a tight range bouncing around in the low $11,000 range, price continued to hold and another crossover formed this time to the upside around 7 p.m. that kicked this thing off and Bitcoin up 8 percent as of this writing. That said in looking at the 12 hour timeframe and my previous analysis I noted there was little divergence there and we were likely to see a run up.
Basically we will need to hold these higher levels and really build some solid support for me to gain the requisite faith to start throwing large sums of money at this thing. In the SHORTER time frame we have just had a negative crossover which indicates there may be a minor pullback to the $12,100-$12,300 range before making another push toward the $12,800 high. This is also indicated by the 2 hour and 4 hour time frames as well. Fibonacci retracement puts a 50 percent retracement at $12,202, typically I add a buy slightly above so I would cautiously look at $12,275-$12,375. Short term BTC is tradable, if you are looking for $12,200 buys and $12,600 or better sells. It’s not at a point where I would feel good buying to HODL. It is at a point where I would buy to snipe in an out on the shorter time frames in order to protect my capital and minimize risk.
My longer term view remains unchanged:
Potential double top reversal. Volumes have remained low during the rallies to the upside followed by high volume sell-offs. High volume price retreats are indicative of lack of faith and usually precede a correction. Although bitcoin's price is ascending on higher lows, the RSI is losing momentum which is also indicative of a potential pullback.
The 1 day, weekly, 3 day and weekly are all well overbought. Adopting a contrarian view to my on Bearishness I decided to plot the MACD divergence between the MACD and the signal line on the 3 day chart prior to each crash and the results are interesting:
558
470 (.84) $3,000 --> $1700
1325
1164 (.87) $5000 --> $3000
1992
1715 (.86) $7500 --> $5400
3406
4203 (.81) $ 12800 --> ?????? (Where we are now)
In simpler terms we are in new uncharted territory with the divergence between the two being greater than it has ever been. The further the two get away from each other, the greater the pull to come back again to a point of balance. Think of it as stretching a rubber band. When that happens there will be a considerable amount of momentum to the downside as BTC will look for support at longer term moving averages. That said divergence is like a rubber band in another aspect as well; the longer it is stretched the more it begins to breakdown and lose its ability snap back to its previous shape. If Bitcoin is able to hold these higher price points for an extended period of time then the divergence within the charts will slowly disappear and these price points will stick.
There is a considerable amount of hype surrounding the entry of the futures market in 4 days, whether that is good or bad remains uncertain. What can be guaranteed will be a period of extreme volatility as the bigger bears and bigger bulls come to the table and begin playing with price.
https://cointelegraph.com/news/cmes-bitcoin-futures-market-could-give-teeth-to-bitcoin-bears
Etherium @ $451
As does typically happen when Bitcoin makes a large upwards move the money is pulled from other currencies and placed into Bitcoin so as to ride the upwards wave. This explains the down move in Etherium price over the last 24-48 hours. What I expect to happen, if Bitcoin continues the upwards push then expect a corresponding period of consolidation in Etherum price throughout the $430-$450 area. At which point, providing Bitcoin price stabilizes, cools and begins trading sideways, then expect an explosion upwards in Etherium price with a ceiling in the $500’s somewhere. Charts are saying that $430-$440 are major support levels and will serve to be a decent buy point. The most likely next move will be a major one to the upside after a few more days of consolidation. Again this is dependent upon Bitcoin holding its ground and cementing its position in the high to mid $12,000 range; if Bitcoin goes down it will take the rest of the Market with it. I would see these lower support levels as a decent buy point with tight stops. We may even see a touch an go at the $400 level, as it seem sas if $400 is the new $200 for those that have been trading Etherium the last 6 months.
LiteCoin @ $102
Same story as Etherium, when Bitcoin makes a large upwards move the money is pulled from other currencies and placed into Bitcoin so as to ride the upwards wave. Litcoin seems to have fared a bit better than Etherium in terms of having money pulled from it and placed into Bitcoin. As for the charts they seem to contradict themselves. The 1 day MACD is showing significant cooling with Litecoin in the well overbought zone. The last time the 1 day really trended south was the $97 to $37 drop, which was actually shaping up to be a normal pullback into the $70’s before the “Great Bitcoin China crisis” threw the entire market out of whack. Short term I will look for range trading opportunities between $98 and $104. It seems to be holding this level just fine and has not really taken a nose dive despite it being in a sellers period on the 12 hour time frame. Litecoin has a tendency to have long periods of consolidation that may last days or a couple weeks before making a move upwards. Depending upon Bitcoin prices I would trade in this area and look for a longer term hold if I can grab some in the mid 90’s.
**Addition I forgot to add this earlier, but as BTC acts like a vacuum sucking the money out of ETH and LTC, on the way up it can act like a hammer when it comes back down. Smaller traders that were confused by the price drop in these two while BTC was going up get scared when BTC turns the corner and start trying to beat the market and initiate sells that will artificially push the price down lower than it should be. This is usually accompanied by some real big buys at the low end of the range and large upwards swings.
My previous analysis:
@pawsdog/12-5-2017-the-market-view-and-trading-outlook
@pawsdog/12-4-2017-the-market-view-and-trading-outlook
@pawsdog/12-3-2017-the-market-view-and-trading-outlook
@pawsdog/12-2-2017-the-market-view-and-trading-outlook
@pawsdog/12-1-2017-the-market-view-and-trading-outlook
