Daily Report – Bitcoin and Market Update (August 22 2022)

HTF 1W:

The weekly chart seems to have rejected a strong resistance region around 25000 USD.

Following the wedge breakout, BTC has slidden down, below the main support area of 22000 USD, over which the bulls had held the defence. Ever since, the bears have regained the control over the market and are in charge now.

It is of special significance, from the technical viewpoint, because that has confirmed the top breakout failure. It’s not only a random resistance that held, but it’s also an important rejection adding to the Bitcoin’s underperformance vs stocks. This way, it seems, that BTC may have lost its only chance to catch up with the rest of the risk-on assets, which had already retested or rejected their 200-day averages, respectively.

If BTC were to reach the point where the stocks reside now, on average, then it would need to increase by about 40% – or more – from the current prices.

Such a failure implies even more weakness. The momentum principle suggests that the underperforming assets will continue to underperform. Such a tendency may take BTC back to its June’s lows or even lower.

HTF 12H:

The middaily chart allows for a deeper a look into the rising wedge setup and its breakdown.

The pattern base size was around 3600 USD. So, the measured move price target is given at $20000. It may be expected, also, because the 20k USD level is a round number. Oftentimes, traders tend to anchor to the round numbers more, and prices tend to gravitate toward such levels.

Besides, the 200-week average price is at 23200 USD, which is now considered long-term reference value per BTC. After breaking below the mean, an upwards pullback may meet more resistance clustering below that level.

Overall, failed patterns tend to perform better in the opposite directions than anticipated based on the breakout itself. So, the fact that BTC broke back inside the previous June-July 2022 range 17.5-22k USD may suggest higher odds for new lows to be established, below 17500 USD.

MTF 4H:

The medium-term outlook gives a closer insight into the consolidation pattern, following the wedge breakdown.

As such, BTC is forming a kind of a range-bound pattern, as it continues to swing between the – more or less – fixed high and low figures at 20700 USD and 21800 USD.

The BPRO Momentum Bands imply that, after the breakdown, the new expected range for BTC is 19900-23000 USD. As long as BTC moves inside this territory, it may well continue the range-bound pattern. Until an either way breakout appears, Bitcoin trading can be more profitable for the trading range traders.

Simultaneously, the BPRO Level Lines show resistance levels at:

24995
23472
22591
21988

At the same time, the Level Lines display support levels as defined below:

20194

These levels could be anticipated to serve as level-to-level references. In other words, when one level is breached, the next one in the direction of the movement can be expected to act as the next “magnet”

LTF 1H:

The hourly chart displays a sideways period for BTC, where the price chops around with little to no specific direction.

The BPRO Divergence System has printed a 100% Div label, signalling a potential for a larger spring or bounce.

While the overbought or oversold conditions do not guarantee immediate success, it may often be considered a leading indicator, preceding lower time frame reversals.

The base size of the pattern is 21800-20700 equal to 1100 USD. This may be an objective added to the breakout level, in the direction of the breakout, so that the upwards objective is 23000 USD, whereas the downwards target reaches as low as 19600 USD.

FEAR/GREED INDEX:

As the wedge breakdown happened, an overall deterioration to the sentiment barometer have come up.

This suggests more vulnerability to the support levels, which are the less likely to be held, the more disbelief and fear appear between the speculators.

Now, at 29 points on the scale, BTC maintains the “fear” status among traders. The more fear in the market, the more likely the support breakdowns are. This also suggests the momentum orientation, and the direction toward which the traders are most likely to look.

Of course, it is not a timing indicator, and it does not aim to define perfect tops or bottoms in the market. Instead, it may prove valuable insights about how the market participants are feeling at given BTC prices. The worse the sentiment readings, the better the chances are for a profitable mean reversion setup for the contrarian traders.

Historically, BTC retraces 80-90% of the values, measure from the cycle tops, to the cycle bottoms. So far, the records have shown a 75% drawdown during this cycle, which leaves still a potential for a deeper retracement, below the 17500 USD lows.

Importantly, macroeconomic environment needs to be accounted for. As such, it gives low consumer spending (sentiment), as well as recessive background. Typically, from the moment the recession is confirmed, there is a higher chance for the risk-on assets to trend lower, beyond the established lows, to later put in a slow-paced, stretched trough pattern filled with accumulation from the smart money.

Hope it helps. God bless.

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