Cryptocurrency
Is Bitcoin Short Term Bullish?
As a trader, one must continually adjust their outlook on the market when new information is presented on a daily basis. While the overall trend remains bearish, the bulls are gaining momentum in the short run. After recording yearly lows at $3,150, Bitcoin has experienced a few relief rallies this week. Three reaction rallies of […]
As a trader, one must continually adjust their outlook on the market when new information is presented on a daily basis. While the overall trend remains bearish, the bulls are gaining momentum in the short run. After recording yearly lows at $3,150, Bitcoin has experienced a few relief rallies this week. Three reaction rallies of more than 7% have already occurred since Bitcoin broke support at $6k. The chart below shows the percentage channels where Bitcoin has increased from previous reaction rallies.
As prices drop rapidly, reaction rallies naturally follow. This becomes dangerous for short sellers and opportunistic for those who are brave enough to go long. There is still a strong possibility that the bear market will record new lows, but in the meantime Bitcoin has potential for continual upward movement. Below is an example of how Bitcoin has demonstrated the breakout of a textbook falling wedge pattern. This is a bullish confirmation in the short term.
Bitcoin now faces tentative resistance at the 3.8k level. After an overextended move, price needs to hold the support level at $3.6k for the bulls to have a chance. Also, volume has to increase for the bulls to maintain buying momentum. Price must rise through the 3.8k level or else Bitcoin may enter a potential head and shoulders pattern on the 4hr time frame. If Bitcoin can form support at 3.8k its next upward target would be 4.2k.
If volume and price continue to increase, the bulls have an opportunity to make a short term gain from the reaction rally. If the price of Bitcoin stagnates and volume decreases, the bears will most likely regain momentum and force price downward. However, there is still a large amount of shorts in the market which is a favorable sign for the bulls.
It is important to note that sentiment throughout the media has been very bearish as of late. For example, the New York Post published an article yesterday entitled One of the first Crypto Millionaires Says ‘Bitcoin is Dead’. Another noteworthy example is CNBC’s Brian Kelly capitulating and entering a Bitcoin short position. This seems somewhat similar to December 2017 when mainstream media outlets were showing retail investors how to buy Ripple at $3.60. In the short term, the market may do the exact opposite of what the majority believes.
Markets often mirror themselves and a short term bull rally may bring us up to test higher resistance levels only to be rejected downward. Although some individuals in the mainstream media are bearish, many people in crypto are still very bullish for 2019. This may be a signal that the bottom is not in and the market has not fully capitulated. Ideally, the majority of investors have to relinquish all hope before the asset can enter a ‘suckers rally’. Many devote crypto enthusiasts are still very optimistic, so it is difficult to determine if a bottom is in.
Disclaimer: I am not a financial advisor. This is not financial advice. Please do your research independently and make objective decisions. This article is intended to educate readers on the recent state of the cryptocurrency market. The author of the article trades cryptocurrency.
Sources:
Charts from tradingview.com