Chartpunk Bitcoin Alpha #69
Join me on the journey to a 250k+ Bitcoin price! We will definitely have some good and bad times on this bumpy road, but with good alpha we will be able to ride strong trends and avoid sharp losses. Being a trend trader, I am not promising to pinpoint exact highs and lows, but I hope my view will assist you in making your own decisions.
HTF Market Structure
The high time frame market structure of Bitcoin has not changed fundamentally during the previous week. Price action is still under the Bull Market Support Band, and in a steep downtrend. If we analyze the macro time frame lows and highs then the statement of a macro bull market can still be made. The previous low is at $28750, a pullback under this level would technically mean a lower low. To me however the whole year of 2021 seems more like a horizontally oscillating market than a bull market. The Bull Market Support Band designates the zone which decides on directions: below $49600 is bear zone, above $52400 is bull zone.
From a macro AVWAP perspective we can see that the average price level of the 2021 November pullback is at $52000, so a confident price action above this level would be necessary to flip that downtrend. The AVWAP level of the 2020 March macro low is currently at $29200, providing support just above the 2021 June low.
The price of Bitcoin is sitting on the lowest Fibonacci support of the 1-year Linear Regression Channel, which usually is a buy zone for the traders who see the market through channels. The bottom channel trendline is currently at around $32000, reinforcing the macro AVWAP support level indicated above.
The high time frame momentum chart is clearly bearish, there is nothing positive to be seen here. Price action is under all of the key daily moving average levels, and the 50MA will cross down the 200MA within approximately one week. Such bearish crossovers are never good for the price. As it seems now, the 128MA has also started descending, which is an other bearish sign. The Awesome Oscillator is bearish, and the RSI on the 3-day chart is trending down. If the negative price action continues, then the 3-day RSI will go into oversold region which really is something very rare on the Bitcoin market. 2020 March and 2018 November crashes have resulted in oversold 3-day RSI, and the reset resulted in huge bull markets in both cases.
The ADX-DI on the HTF 1-day chart is clearly bearish, this indicator has been signaling a bearish trend since the negative cross around $60k. Investors trading this indicator have no motivation to get back into the market right now, especially as the Parabolic SAR is also supporting the downtrend.
LTF Market Structure
The key low time frame levels of the 2021 November downtrend based on AVWAP analysis are $44600, $47700 and $51100. These are resistances that need to be tackled by the bulls if they want to take back control from the bears on the low time frame chart.
Predator Chart Analysis
The HTF Predator chart is bearish. Indicator is bearish, 20-period MA is descending and the price action is way under the 20-period MA level. Confident price action above $51000 could be the first step here to flip the bearish structure of this chart.
The 1-day Predator chart is also bearish. 20-period moving average is descending, price action is consistently under the 20MA and the indicator is bearish. No sign of bull revival here.
This is the only chart today that might provide some hopium for the bulls, as the Predator indicator has flipped bullish on the 8-hour time frame. The bullish indicator is supported by a number of Knoxville Divergences which are reasonably useful to spot trend exhaustion. KD on the 8-hour chart has no significance to me, but it is a signal anyway. The 20-period moving average however is in steep decline on this chart, and price action is under its level. A confident move above $43000 might flip this LTF chart into a bullish structure.
From a trend trading perspective I do not see any reason for opening long positions in Bitcoin for now. Price action is clearly bearish, and anything under $52000 is bearish to me from a trend trading perspective. The fact that the price action is in the bottom zone of the 1-year Linear Regression Channel could be a reason for long term investors to DCA into Bitcoin positions. Divergences are also showing up on high level timeframes, which may signal bear exhaustion. I am closely watching the 3-day RSI, as it has a clear chance to reach oversold territory, and that has been macro bottoming signal in the history of Bitcoin.
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What is trend trading?
Trend trading is a market strategy that is reasonably different from swing trading or day-trading. A market “trend” is a tendency of a financial market price to move in a particular direction over time. Swing traders and day-traders are usually trying to pinpoint low-term market tops and bottoms, and take aggressive positions expecting to profit from a swift change of market direction. Trend traders are looking for consolidated and strong directions on a given market, and are trying to ride the trend for as long as possible. These traders normally enter in the market after the trend “properly” establishes itself. My core strategy in trend trading is to look for a market setup where the long time frame market structure is indicating a solid trend, and intact price action is supported properly by the low time frame charts.
What are my key indicators?
I am using trendlines, channels and moving averages to identify market structure and to spot trends. In crypto trading my core moving average indicators are the 50 and 128 daily moving averages. I am also using anchored volume weighted average price (AVWAP) analysis to identify support/resistance levels.
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The present article is a free material, for entertainment and educational purposes. Nothing in this post shall be considered as financial advice, you shall never make any financial decisions or financial investments based on a singly source of information and without doing your own research.