Daily Report – Bitcoin and Market Update (August 29 2022)
The weekly bar chart displays an instance of a substantial rejection of the 25000 USD resistance.
Falling off the 200-week average, BTC seems to be struggling to maintain the support levels more often than note, on lower time frames.
Having come off over 20%, measured from the local peak, Bitcoin prices have failed to catch up with the 200-day average (smooth curve), as opposed to many stocks which did climb to their bear market resistances, accordingly.
Following the momentum principle, underperforming assets will continue to underperform, and that has been the case of Bitcoin over the past weeks.
For now, BTC is moving back inside the consolidation pattern within the 17.5-25k USD range. With consequent breakout failures on top, BTC bulls are in danger of falling below the June’s lows, as most often the failed patterns perform better in the opposite direction – here, to the downside.
The middaily chart seems to show that the Bitcoin price be persisting into lower regions of the consolidation pattern.
As the retracement gets deeper, the bulls become more hopeless and would hold on to their losses, hoping for a sharp reversal. However, this may not be the case for BTC in the short-term. Yet, the lower the prices get to the swing low area, the more opposing force the sellers may initially encounter. Eventually, the clustered orders at the support may give up with a more spectacular break to the downside.
The 200-day trend continues to decline steadily, and it serves as the “bear market trend line”.
The CTF Trailer maintains the bearish tune, and the main resistance at $21463. As long as bulls do not reclaim this level, the bears are in charge and of decisive vote.
The medium-term chart of Bitcoin price, shows a clear shift in the direction that the volatility has followed, and it is downwards.
The BPRO Momentum Bands reveal that the projected range of BTC to move within is at 19000-21300 USD. Note, that these levels also align with price action based support and resistance thresholds. It is an additional confluence, which adds the technical importance to the areas. On a self-fulfilling prophecy effect, more eyes may be attracted to the same levels, and an order clustering may occur. As a result, any break through such a support layer could be more violent and aggressive, or volatile.
Technically, only a break below 19000 USD with a daily close below may validate a downwards break, which could potentially take it into the June lows.
The hourly chart shows an attempt of a local breakout for BTC. However, it is built upon vulnerable base.
As BTC tries to pierce through the 20000 USD resistance level, it is happening following a massive slide to the downside. Hence, any upwards reaction is a counter trend and a correction to the larger trend, coming off the 25000 USD highs. By definition, it is having better odds of failing than succeeding.
So far, there has been only one instance of a BPRO Divergence System alert of 82% Div. Such a bullish divergence may naturally appear after a more volatile breakdown, and it also encourages to trade against the trend – which may be unpleasantly unprofitable in about 30% of instances. Without stop-losses, such a game is playing with fire and may end with a financial ruin.
At 24 points on the fear & greed index scale, the extreme fear is back!
Among traders, there are many common mistakes made from emotional and cognitive reasons. It may well be associated with a faulty information processing, poor memory, misinterpretation of data, or saliency.
Hence, many traders will get trapped into thinking that just because Bitcoin has gone down recently, it will keep going down with no end.
On the other side, there are traders who will be loss-averse and would hold on to their losses, because of misinterpretation bias, where they would confuse a short-term correction with a major trend breakdown.
All the emotional and cognitive factors contribute to the phenomena, where investors get the most bearish as the market approaches the main support area, and the most bullish feeling regrets of missing out, right at the resistance.
Because of that, the more fear in the market, the better the contrarian position may get. Potentially, the more depressed the buyers, holders, and market participants are, the more profitable position it can be to take the opposing side of the bet.
However, this needs to be combined with more detailed technical analysis insights, and indicators, in order to mathematise the risk factors. It needs to be paired in order to work more efficiently, rather than use the sentiment indicators as a sole source of trading information. There may always be more downside around the corner. It seems to be the case for Bitcoin, for now.
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Hope it helps. God bless.