Daily Report – Bitcoin and Market Update (August 21 2021)
The middaily chart is showing two major support areas underneath the current price action of bitcoin. Support zone LFT refers to short-term demand area based on volume-based average price (aVWAP) and it’s 45-47.5k region. The MTF demand zone is given by volume at 40.9-42.5k area and whenever the LTF zone fails to hold, the MTF is the floor expected.
Based on the price action and the pre-breaker candles from mid-high 50000s candles before the crash happened in May, one can confirm that the main levels defining supply are 52.9k and 56k. It aligns well with the daily chart given in my most recent report defining 53-58k supply zone confirmed by volume profile.
The case of BTCUSD is hence simple. Upside continuation towards 53-56k or up to 58k area is expected sooner or later. If local support zone fails to be held, the MTF 40.9-42.5k is the next bounce zone to ladder your bids in.
MTF chart gives closer look into the local context of BTCUSD. Clearly, there are three main local supports that matter: 47k, 44.8k, 41k. The rule Is that when one fails to hold, the one underneath “activates”. This “activation” comes from the psychology of our behaviors. Behavioral finance, the prospect theory causes the technical analysis to be self-fulfilling prophecy in this context as when one support fails, the traders urgently need to find their next reference point, the psychological anchor they will put all their trust at. When there’s no reference point, you feel uncertainty, stress and pain from that. This is typical “away from pain” mechanism behind our cognitive mechanisms.
On the classical technical analysis side, there is a failed chart pattern of a rising wedge in the chart. As the statistics reveal, the failed patterns tend to perform far better than the regular patterns. For this reason, the failed wedge (which was “technically supposed to go down”) indicates higher chances of BTCUSD visiting back 50000s region sooner than later.
There’s an overall FUD going on with FED’s regulations over crypto, Afghanistan tensions and more. This eventually may lead to a potential flash crash with immediate 10-25% dump out of nowhere as a result of sell-the-news triggers for trading algorithms. Before you manage to log in to an exchange, the selloff is complete already. Such flash crash is exactly what could take bitcoin as low as 41k with a very solid buy the dip opportunity.
Again, due to the mean reversion and statistical nature of time series data that price action of BTCUSD is, eventually there will come a retest of 200MA around 41k. Regardless it will stem from a news event drop or an organic price retracement.
The index shows extreme fear at 78 points on the scale. The same people that were extremely scared of 30k breakdown and targetting $10000 for bitcoin, now are fomoing in right into the resistance regions. The sentiment has changed and reversed to the very opposite stage. The same people who sold at 30k are now buying & expecting new ATH (which will come in my opinion, but not immediately).
Remember, crowds are always right in the middle of trend and always wrong at the extremes. If you enjoyed this report, leave a sticker below.
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