Bitcoin’s short-term outlook deteriorated Monday after it fell to $45,672 intra-day, a far cry of the weekend’s encouraging rally above $50,000.
The year is almost over, with all-time highs at 33%, so traders will likely adjust their expectations to push the $100,000 BTC target further into 2022.
Everyday cryptocurrency market performance. Source: Coin360
Day traders, 4-hour chart monitors and over-leveraged shorts are likely to be panicking (unless they went short at the weekend’s weakness or at this morning’s weakness). But let’s zoom in a bit to see where Bitcoin price is currently.
Daily chart of BTC/USDT Source: TradingView
The price is struggling to break away from its daily trend of lower highs. Aside from the Dec. 4 decline to $42,000, traders seem hesitant to invest in the latest dips.
Swing trading BTC has been easy with the moving averages. The current 20-day MA (blue), is currently below the 50-day MA. Many traders buy assets that have a few daily closes above 20-MA, and then sell when they fall below it. This is an indicator that the short-term trend has weakened.
This is a common practice for momentum traders. They might wait for BTC’s daily close to $53,000 above before opening long positions. For traders who are more cautious, it might be worth waiting for convergence between 20- and 50 MA to see if there is a trend reversal. The strategy works well if you look at the price action over the past year.
Why traders anticipate more downside
Experienced traders will know that Bitcoin prices have a tendency after hitting new highs to make double tops or M-tops as well as head and shoulders patterns. On crypto Twitter, many analysts have been pointing to what they believe to be a double-top, which is a clear pattern of trend reversal.
Daily chart of BTC/USDT Source: TradingView
We can see the beginning of a head-and-shoulders pattern by looking at the daily timeframe. Current dips and subsequent consolidation could complete the right shoulder. With a neckline of $41,500 and a target price near a number so low it will not be written here, this is a very unlikely scenario.
Traders may also notice that the neckline for said head and shoulders pattern is aligned with a large gap on the Volume Profile Visible Range indicator (VPVR), which indicates increased buying interest at the $40,000 mark.
It’s still too early to be too excited about H&S patterns, especially as analysis of price action can not be determined using a single indicator. However, it is worth noting.
Update on $BTC S/R according to Volume Profile: While $47k has been a strong support, if it breaks, the next strong support will be at $40k. If we can break the $50.6k resistance, the next support is at $56k. Let’s see how this set-up plays out! pic.twitter.com/hcmvmUbVln
— Whalemap (@whale_map), December 11, 2021
Whalemap, an on-chain analytics outlet, has data that also points out the $40,000 mark as an area worth watching. Andy Bohutsky, Whalemap founder, spoke to Cointelegraph.
“Basically, if daily candles are closed below the support mentioned above, we will likely go to a lower level. We are about $40,000 below this level.
Although Bitcoin’s current price action is not encouraging confidence for traders who bought higher, or expected the price to trade between $74,000 and $80,000 in December, analyst Mohit Sorout recently noted that negative funding phases have been great buying opportunities.
There is no downside on this asset$btc pic.twitter.com/Vr7mPFOvxU
— Mohit Sorout (@singhsoro), December 11, 2021
Oversold on the daily timeframe are the moving average convergence divergence, (MACD), and relative strength index (RSI), both of which historically point to accumulation phases and good chances to convert dollar cost average into new long positions.
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Eileen Wilson –Technology and Energy
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