Connect with us

Market Analysis

A Battle Between Bulls And Bears Is Brewing (TA Snapshot)



In my last article “Is Bitcoin Pulling An April Fools Market Recovery?”, I mentioned how I had fears that the short term Bitcoin (BTC) pump we saw early April was not sustainable, and that the quick move over 7k could just be a temporary bull trap. The price has since fell back down below 7k, reaffirming sentiments that the reversal is not yet in play.

With that said, there has been something interesting brewing in the last few days that has not quite gotten the attention I believe it deserves – and that is the epic battle between bulls and bears going on right now for control of the market.

It is very likely that the winner of this battle will act as a catalyst and help decide the directional fate of Bitcoin for the short term being.

So how can we tell that there’s an ongoing power struggle between the bulls and bears? And are these bullish, bearish, or neutral?

1) Narrowing Of Price Action (neutral)

When price action narrows, this tells us that volatility is decreasing. In markets, we traditionally see compression of price action followed by more volatile expansions. It’s important to note that there is no general rule in terms of direction of the movement, we just know that quiet movements are often followed by louder ones.

A great way to get a bigger picture view of the narrowing price action is to take a look at the weekly chart. Larger time frames will give a more accurate indication of volatility.

If you look at the most recent candle sticks, the wicks are becoming shorter (which indicated less intra week swing in the price) and the candle bodies are becoming shorter. This confirms that volatility is lowering. This is neither bullish nor bearish, it simply indicates a bigger move may be coming soon.bitcoin weekly

2) Shorts are at an all time high (bearish)

short bitcoin

Market sentiment is an incredibly important behavioral economics principle when it comes to trading. According to game theory and market principles of sentiment, being a successful trader is not about what you think is the best trade (1st degree of decision making), or even what you believe others will think is the best trade (2nd degree of decision making). The issue with the second degree is that it assumes everyone else thinks using the 1st degree of decision making and implies the logical fallacy in which you believe you are the only trader smart enough to employ the second degree of decision making. This also does not take into account that a significant amount of trading volume comes from bots, scripts, and algorithms which have the advantage of not having to make trades off human emotion. These bots only care about 2 things – price action and trends.

So how can we filter out a lot of the speculation behind predicting prices?

The answer is simple – we take a look at the trend. By seeing that shorts are at an all time high, you have quantitative evidence that market sentiment is very bearish. They say that the trend is your friend, and bears seem to have control over the macro trend at the moment.

3) Buy Markets Percentage (bullish)

The buy market percentage is an interesting tool that can be used to help traders find the start and end of a bull market. The tool has had positive correlation with the price of BTC, so it is a useful tool for traders to add to their tool box.

The tool states that when the buy market percentage is less than 10%, price may have found its bottom. According to the chart, we bottomed out at the end of March and are now in the process of a bullish reversal. As of today (April 11), the buy market is currently at 37%

buy market

It’s Decision Time For Bitcoin                                                                                                                          As volatility decreases and price action continues to move sideways in consolidation, we can see prices being forced to complete the descending wedge pattern in the next few days. Whether price breaks above or below the descending will be paramount to the momentum Bitcoin will have. Bitcoin has found a strong level of support (denoted by the green box around the 0 Fibonacci level). If prices fall below this level with momentum from bears, we will likely fall below the $6300-6500 level. For now, bulls have been fighting hard to keep prices above support. The next major level of resistance will come from the .236 Fibonacci level.

technical analysis of bitcoin

In order for the market to begin any sort of factual bull run claims, we will need to see a successful close (and preferably a successful retest) above the .382 Fibonacci level. Several daily closes above the .382 level would provide us with “higher lows”, which would be an encouraging sign that a reversal into a bull market is near.

I will be keeping a close eye out on Bitcoin this week. If I see that altcoins continue to look as jumpy as they have been, along with a combination of bulls holding control of current prices and an uptrend in volume, I will begin to accumulate my favorite altcoin projects.

Note from the author: All content written in this piece is an opinion, and should not be taken as financial advice. Always exercise caution when trading in volatile markets, and never invest more than you are willing to lose.

Ro Vanaki is our market analyst and contributes content with a focus on trading and technical analysis of the cryptocurrency markets. He has a passion for understanding the behavioral economics that affect market movements, and uses this approach to fine tune his trading and technical analysis strategies.


Market Analysis

Is Bitcoin Pulling An April Fools Market Recovery? (TA Snapshot)



After taking a 45% dip in March, Bitcoin (BTC) has started April off with a small but quick recovery in price. Observing the overall community sentiment, including social media sentiment, there seems to be optimism from the majority that the worst has passed.

With that said, there is still a minority of the community (mainly technical traders) that are cautious about this new optimism.

One of the main reasons that many technical analysts such as myself are approaching this small bump in prices with caution is because of a phenomena in trading known as the

“death cross”. The death cross is one of the most infamous occurrences in technical trading when it comes to indicating a bear market. As pictured below, a death cross occurs when the 50 day moving average (the gold line) “crosses” below the 200 day moving average (the blue line).

death cross

Another reason I implore caution with being overly optimistic here is because markets rarely have an immediate reversal from bear to bull market – there is often sideways consolidation for an extended period of time as the market needs time to recover before “regaining trust” to invest back in.

If we take a look at the stock market crash of 2008, the market dipped about 70%, and then consolidated for roughly 275 days before breaking its previous all time high as pictured below:

NASDAQ performance

This is extremely common in markets, and as a trader who is looking to use all tools at his or her disposable to minimize risk and maximize success probabilities, it would be wise to not think that bitcoin will be an exception to this. History may not always repeat itself, but it does always rhyme.

With all this said, I understand that the cryptocurrency market moves leaps and bounds faster than the stock market. However, it still important to remember that typically less than 10% of all traders end up being profitable in any given market, and with how badly many traders were burned in the correction, it would not be surprising to see a few months of sideways movement before we start a true reversal.

For these reasons, traders should exercise caution if making trades based off the recent uptick in sentiment and bitcoin price. For all we know, it could just be one big april fool’s joke before we descend further down to the true bottom due to the death cross in moving averages.

Note from the author: All content written in this piece is an opinion, and should not be taken as financial advice. Always exercise caution when trading in volatile markets, and never invest more than you are willing to lose.

Continue Reading