Daily Report – Bitcoin and Market Update (August 28 2021)
The middaily chart is showing a tricky spot for bitcoin at this moment. It has got as many bullish indications as potential retracement setups. On one hand, it has just seen the upwards trend breakdown. The breakdown confirms local signs of weakness and trend getting wobbly. At the same time, the breakdown eventually has come to be failed as yesterday’s candle closed back over the broken trendline, confirming typical swing failure.
Local downtrend has also been broken in the upwards direction. Per the ADX trend strength indicator on top of the chart, there’s a declining tendency in the trend strength showing high chances of explosive move incoming. The average directional index (ADX) is a technical analysis indicator used by some traders to determine the strength of a trend. To bring back the trend strength Id like to see ADX downside tendency upwards breakout. As long as it’s trending down it can be read as a form of a bearish divergence (Lower Highs ADX vs Higher Highs Price Action) and sign that taking profits is suggested.
The bullish signals are: bullish aVWAP crossover, bullish momentum cross on Birbicator in the bottom section of the chart, trendline breakdown failure.
The bearish signals are: downtrend in ADX trend strength, trendline breakdown, abnormal upside volatility since July 21st (BTCUSD rarely ever gives moves larger than +60% up with little to no correction), resists at 50k round number.
Because of all the described above, I personally claim that bitcoin is a bit of a gamble to trade atm. Early and not fully confirmed to close out all LTF-MTF positions and at the same time late for long entries. It’s in the place where one piece of a news can cause an explosive movement. Bullish news takes it to 53k+ while bearish news FUD can take it to low 40s.
It’s either 53k or 43k then. I’m quite positive that 53k is just a matter of time as 53-58k is where the daily volume profile records serious spikes. The question is, if it shoots there straight up from here or follows regular, technical and healthy retracement to reload the longs with good risk/reward around 42-43k.
MTF chart analyzed from the perspective of volume profiles shows decent confluence through all the recent major swings. One may conclude that the most essential local zones are:
SUPPLY ZONE: 49.1-49.7k
DEMAND ZONE: 46.6-47k
The longer BTCUSD resists to push through and reclaim the supply zone 49.1-49.7k, the higher the chances are for bitcoin to revisit demand zone 46.6-47k and hence fail the “bull flag” pattern with a fake breakout on top once MA50 (orange average) is lost with ugly close below, back inside the flag pattern. This would eventually lead to the retest of MA200 44.3k with potential overthrow to 42-43k with long-legged capitulation candle (e.g. hammer).
As the trend is still upwards (although weakening), it always makes better sense to anticipate trend continuation rather than fade the trend in search of shorting perfect top or longing perfect bottom (impossible). Because the trend is getting weaker, and the “bull flag” pattern is printed, there’s clear condition that has to be met by bulls in order to squeeze shorts and shoot straight up to 53k. Conditions are as follows:
BULLISH CONDITION: Daily/Weekly close over supply zone 49.1-49.7k -> leads to 53k.
BEARISH CONDITION: Daily/Weekly close below demand zone 46.6-47k -> leads to 44.3k
I make sure to put the “bull flag” in quotes as the pattern itself resembles a bull flag. For the chart patterns though, what matters more than a pattern shape alone is the pattern’s context. The classical reliable bull flags occur in a fresh uptrend which is just starting the rally rather than occur after 70% upside push like BTC is showing. The bull flag pattern is a typical continuation pattern. In this specific context, this “bull flag” pattern is a part of slow pacing, lowered-momentum uptrend, which has already started getting wobbly. For this reason, it is NOT the most reliable pattern you could get and accounting the market context that the pattern occurs after +70% upside push is rather a sign of weakness to me. With all that, no confirmation to either case means little reliability and low certainty as a result. If this “bull flag” fails and BTCUSD prints ugly candle closed back inside the pattern, this shows distribution and likely gets us closer to 44.3k scenario. If the ongoing “flag” breakout holds well and the bullish condition mentioned in the section above is met, then this gets us closer to 53k.
In other words, it’s looking good in here, but I’m very suspicious and cautious as the goodness is not of high reliability. It just “looks” good but what’s happening behind the scenes (market context) shows that it can reverse likely at any second pulling bitcoin down to 44.3k.
In conclusion, it’s worth collecting more profits here as it bears the risk of local reversal. Nobody’s ever gone broke from taking profits.
No specific divergence shown which shows that there’s NOT been any aggressive profit taking occuring in the past days. For this reason, the answer would come arbitrarily from the price action as the onchain doesn’t show any reversal symptoms so far.
NUPL at 0.579 which is still in the belief zone where the crowds are relatively complacent with not much realized profits. Bears the risk of some heavier profit distribution all of a sudden (which could take us to 44.3k btw).
It’s another reason to encourage everybody should take at least some profits off the table. Unrealized profit is no profit
The chart shows extreme greed reading at 78 points on the scale. Extreme greed is historically where the profit taking is suggested. On the contrary, 80-day long period of extreme fear from May’s selloff to 21st of July was perfect time to accumulate against the crowds opinion and certainty the market was to continue downwards.
Here, the case is opposite and I personally evaluate near 50k levels to be of good risk/reward opportunity to take some profits indeed, while hoping for higher price targets around 53k. Monitor the price action as that’s where apparently the entire action will happen. On top of that, you can still take the opportunity and book the lowered prices with a special limited discount coupons added on top of that. The discount coupons are only available to our free newsletter subscribers who get the coupons directly into their email mailbox. If interested to improve your trading profitability, learn how to recover faster, it’s your chance to prolong/renew/purchase your premium membership with lowered pricing AND special discount coupons to lower it even more, rush over and claim your free newsletter copy now (the offer is time limited!). Once it’s gone, it’s gone for good. Claim your coupons now.