Trading Bitcoin: Another Dead Cat Bounce

Another Dead Cat Bounce

On the weekly chart the sequential indicator has given us a new green 3 candle. While the sequential count is still green, price is in a bearish overall posture. The chart above displays Bitcoin’s weekly heikin ashi candles. As you can see, we have just received our first red weekly candle in the past month. Heikin ashi candles are calculated differently than traditional candlesticks and they are used for spotting changes in trends. The fact that price has given us our first weekly red heikin ashi candle is somewhat bearish for the macro trend.

Daily Heikin Ashi

On the daily chart, Bitcoin is on a red 4 of 9 candle. Therefore, bearish momentum is likely to continue for the rest of the week (according to sequential theory). Our previous red 3 candle experienced a price increase and briefly flipped to a green heikin-ashi candle before a prompt rejection by the 200MA (orange). On the daily chart above, you can see we are still trending downward as the 50MA (grey) continues to act as support.  If the 50MA is broken,  look for a large price decrease into the $7.7k price region.

4 Hour

Bitcoin is on a red 3 candle on the 4 hour chart above. Our last red 2 candle closed below the previous red 1 candle which activated a short trade based on sequential theory. Price is still holding support at the 200MA (orange) but overall, the momentum of the trend is bearish.

Conclusion

After our first fall to $8.7k, the bulls rebounded but were prompted rejected at the daily 200MA (orange). Now price is trending into a downward price channel with several bearish indicators. The bulls must hold the daily 50MA (grey) in order to have a chance at a trend change. For now, price is overall neutral – bearish.