Originally published on Jan. 15, 2021 by TraderStef at CrushTheStreet
There will be no link-garden from the financial press, digital-fugazzi fundamentals, cryptophant opinions, geopolitical fodder, or skewed technical terminology created by the crypto-currency community, but only seasoned technical analysis. Just because crypto is a new and immature asset class does not mean technical analysis basics do not apply or can be twisted to fit a narrative. If a new company IPOs in the stock market, the same tried and true methods of technical analysis apply to its stock chart because it’s about price trends, math, patterns, and studies.
A brief synopsis of my bitcoin analyses from articles and subsequent Twitter threads since calling the first major breakout in Nov. 2015 and high in 2017, can be found at the “Bitcoin Portfolio Project” page on my website.
High Speed Trading Platforms Dominate Bitcoin (HFT, Algos) – Bloomberg, Jun. 2017
“BTC is currently a darling for tech-oriented get rich quick speculators, led by some savvy players who know how to manipulate a market. That doesn’t invalidate it, just some of the memes used to promote it. Less than 2% of BTC accounts hold more than 95% of all bitcoins. We hear that ownership is becoming increasingly concentrated on the way up. That sounds likely. At some point, it will go from accumulation to distribution and then we will see how real the BTC market really is.” – Seabridge, Jan. 2021
To view a larger version of any chart below, right-click on it and choose your “view image” option.
Bitcoin Monthly Chart as of Jan. 15, 2021 at 4:35pm EST…
I am using a monthly chart that is void of multiple trendlines, moving averages, patterns, and Fibonacci levels in order to view the big picture without distraction. The following weekly and daily chart will include more information.
At first glance, the StochRSI and DMI-ADX studies appear to be screaming bullish when their current position is compared to the past. The StochRSI is in overbought territory and can remain there for an extended period, and the DMI-ADX is in a bullish Alligator Tongue power-trend setup.
The two things that stand out as a near-term red flag is the potential for a bearish Plunger (think toilet plunger) candlestick developing this month, and a huge gap between the current price action and the 50 Exponential Moving Average (EMA). Price always snaps back to a mean reversion and the current over extended three-month parabolic move is an obvious signal to exercise caution and take some profit off the table.
Bitcoin Weekly Chart as of Jan. 15, 2021 at 5pm EST…
The weekly chart clearly shows the 12k resistance level drawn back to the 2018 Dead Cat Bounce that followed the initial price plunge in 2017. When a bearish Descending Triangle pattern developed throughout 2018, I repeatedly advised folks to wait for the 12k lateral to be taken out decisively before putting substantial capital at risk while waiting for a sweet spot momo play. If you truly believed that 20k would be retested, then a decisive breakout from 12k with a rising buy Volume pattern was an ideal time to layer in a low-risk position instead of sweating bullets through the chop and rants of FOMO from the bleacher seats. It took three years and two failed attempts before 12k was breached with conviction. When the price action approached 20k, I suggested taking some profit off the table because you can always catch the next bus from a lower price point.
“A $3,000 -15% plunge in Bitcoin within 24hrs of the last warning given above to wisely take some profits, but cryptophants will still claim that Technical Analysis does not apply to $BTC crypto after years of dropping the knowledge.” – TraderStef, Nov. 26, 2020
That brief throwback morphed into a rocket shot to 40k. I also suggested taking some profits during an interview last Sunday when the price action was running hot into the mid-30s. This past week, the price printed a high of 41,969 and a low of 30,635, which was a 25%+ plunge over a four-day period.
Take note that the StochRSI on the weekly is just beginning to show a breakdown signal. The DMI-ADX appears bullish, but is actually close to an overbought peak that hints at a larger pullback or extended consolidation is on the horizon.
Bitcoin Daily Chart as of Jan. 15, 2021 at 5:40pm EST…
An Ascending Broadening Wedge sticks out like a sore thumb on the daily chart. The price action needs a rest because pigs get fat and hogs get slaughtered, as top and bottom callers become cotton pickers. Taking profit off the table is always good. You can always layer back in at the next low risk opportunity.
UPDATE: Jan. 21, 2021 – Bitcoin Daily Chart as of Jan. 21, 2021 6pm EST… breakdown away from bearish Ascending Broadening Wedge confirmed.
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