Chartpunk Bitcoin Alpha #70
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.
High Time Frame Market Structure
On the weekly Bitcoin chart we can see a slightly ascending trend with higher highs and higher lows. The AVWAP of the uptrend since the 2020 March crash is providing support at $29200 while the AVWAP of the 2021 November pullback is currently resistance at $51500. The 2021 June low of $29750 is in confluence with the AVWAP support, I consider this level as the ultimate support of the current macro bull market.
Linear Regression Channel analysis is indicating Bitcoin sitting on the lowest Fibonacci support level. Investors who trade channel trends are considering the zone between the lowest Fibonacci support and the bottom channel trendline as an ideal zone for dollar cost averaging. Accordingly, our current chart is indicating the zone between $32000 and $42000 as an ideal DCA zone for long term investors, with clean invalidation below $29000 as indicated above.
Long term Bitcoin trend traders like to follow the guidance of the Bull Market Support Band, which is currently in a bearish setup with the faster moving trendline being under the slower moving trendline. Based on the BMSB, the region under $50000 is bearish, and the zone above $52500 is bullish.
The analysis of the 20/50/128/200MA chart is bearish. Price action is currently under all of these key moving averages. The 20MA and 50MA are in steep decline, and the 128MA is starting to descend as well. The 50MA is crossing down the 200MA (death cross) which is usually a bear market symptom. The levels of $46000, $49000 and $53000 are clear MA resistances to tackle by the bulls. Confident price action above $53000 would be needed to arrange the lines back into a bullish structure. The Awesome Oscillator is clearly bearish, and the RSI is trending down. The 3-day RSI has reached the oversold territory only a handful of times during the history of Bitcoin, and such event has always been followed by huge bull trends. Let’s see if the 3-day RSI will be able to reset as oversold this time.
Multi Time Frame Momentum Analysis
To identify the momentum of the Bitcoin market I am using the Directional Movement Index on the 4-hour, 8-hour, 1-day and 3-day time frames. Based on the multi time frame chart the Bitcoin market is in a bearish momentum. The 4-hour time frame was able to flip bullish, but seems to be on the way of returning into a bearish structure. All of the 8h/1d/3d time frames are bearish. The current high time frame momentum on the Bitcoin market is therefore bearish.
Low Time Frame AVWAP Analysis
The AVWAP analysis of the 8-hour Bitcoin chart is showing the price bouncing down from the $44700 AVWAP level of the December 26 pullback. The Stochastic RSI is overbought which is also showing the exhaustion of the bulls. Our chart is indicating the levels of $44700, $47700 and $51000 as key resistances. Confident price action above all of these levels could tackle the 2021 November downtrend.
Multi Time Frame Predator Chart Analysis
The Predator indicator is clearly bearish on the 3-day and 1-day time frames, with the indicator being bearish and the price action being under the descending 20-period moving average lines. The 8-hour and 4-hour time frames have been bullish for some time, but seem to reverse. Losing of the 20-period moving average lines on these time frames, and flipping back the Predator indicator into bearish mode would show the end of the bullish revival of the previous days.
In order to flip the multi time frame Predator chart into bullish mode, Bitcoin investors should consistently trade above $50000. Losing the level of $42000 could send all of our Predator charts back into fully bearish mode.
From a trend trading perspective I still 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 between $42000 and $32000. Divergences are also showing up on high level timeframes, which may signal bear exhaustion, but the bulls are not showing convincing power yet. 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.