Is Bitcoins Rally Over?
Bitcoin BTC was up 17% in July, enough to calm the cryptocurrency markets after months of cancellations. This has led to similar debates going on in the stock market as to whether this is a bull market or the start of a new bull trend. In July, when the bear market was in the rally field, I added to the discussion by suggesting that commodities "should consider selling the rally to $ 26,500- $ 27,500". Until you reach that height.
Discussions were heated this week as bitcoin dipped above $ 24,892 on August 10, and the more than 7% drop on Friday is likely to fuel the discussion. What are the current technical perspectives?
In late April, I warned that Bitcoin's breakout from its early 2022 lows, line b, was simply a breakout or continuation pattern in a downtrend. This type of training is open in all markets and is generally quite reliable. The break of the early May support point c predicted a downside target at the S1 annual pivot support at $ 27,540. Bitcoin prices stabilized at this level for four weeks until another sell-off took them below $ 18,000.
On Balance Volume (OBV) appears below the histogram and is my favorite volume indicator. Volume rose as bitcoin fell in line with its price action in early May. On June 12, OBV broke below the long-term support at Line 1, as it predicted a further drop in the bitcoin price. Regular readers of my Forbes.com stock commentary will have noticed that OBV lowers prices whenever it raises prices.
When bitcoin rose in mid-July, OBV briefly rose above the bearish EMA. This positive action didn't last long. It soon subsided and reached new interesting levels this week. The increase in volume on May 12 and June 12 helped create a wave of selling pressure that is still there. The low volume gains from the recent rally (see arrow) were also consistent with a weak rally.
In my regular discussion of continuation patterns in stocks or ETFs, I notice that in my experience these breaks in the overall trend serve to win back very high bearish or bullish sentiment. Admittedly, the bearish sentiment in the cryptocurrency markets was very high between the end of June and the beginning of July. The Crypto Fear and Greed Index was low of 6 on June 19 and peaked at 46 on August 14 before dropping to 30 on Thursday. Unlike the stock market sentiment indicators I've been following for decades, I don't have a track record with this one, but it has been performing as expected for the past couple of months.
Now that bitcoin closes the week below the monthly level of $ 22,231, the next possible target is $ 19,844, which is S1 support. While some are now convinced that the worst cryptocurrency sell-off is over, a rebound cannot be ruled out next week. The resistance is currently at $ 22,231 and the 20-day EMA is at $ 23,265. The faster falling OBV than bitcoin suggests that bitcoin will return to July lows and possibly even lower.