Daily Report – Bitcoin and Market Update (January 17 2022)
Weekly chart has brought little change with the close of the past week. The session was trapped in the body of a spinning top candle of low volatility spreading between 39650 USD and 44453 USD.
BTCUSD has for a few weeks already been under the impact of bearishness within the large range 28000s USD to 69000 USD (the dominant range). Because most of the indicators are bearing a lot of lag, more often than not, an indicator flashing bearish “signals” like death crosses or a bearish indications on BPRO, they come around the bottoming periods. It is natural result of a lot of lag applied.
CTF Trailer shows a key weekly invalidation level at 54900 USD. In case it’s broken to the upside with a weekly close through, it annihilates the prior bearish thesis lasting for past few weeks. It is hence the key weekly resistance level I would consider significant from the technical viewpoint.
BaseLine average around 50000 USD suggests to my mind that sooner than later we should see bitcoin trade back at these levels. It is due to the mean reversion nature of the markets. Sooner or later, any market deviated against its average reverts back to the mean. It doesn’t necessarily mean that the market has no chances of visiting lower levels than the past week. Instead it defines a fair price of bitcoin and strong anchor reference for short-term and intermediate-term swing traders.
BWAP block suggests bitcoin is actively searching for a long-term support at current levels.
Price Action wise, bitcoin is sitting right at the support of what many would call a Head and Shoulders neckline, a horizontal support. Because vast majority of long-term chart patterns are discounted by the market long before they are supposed to start playing out, they more often than not appear to fake the breakouts. Hence, one of the scenarios one may want to be ready – just in case – might be a potential wick down into mid 30000s USD with immediate buy-back using the liquidity of late shorts trying to get on the neckline break. While I’d not bet my money much on this scenario, it’s worth getting a plan in case we see external FUD empowering the downside effect.
Here’s a visual aid to help you understand the last paragraph.
Daily chart is quite clearly attempting a break above the BaseLine with a lot of resistance at 43000 USD level.
Because the downside potential is currently limited by the orange BWAP block, the support area, it seems that a more explosive move is processing with a proper outbreak only when the price reaches through the local extremes of range – 41.8k or 44.4k USD. Whichever extreme is breached first, there’s a strong chance of continuation in the direction of a breakout, provided that the breakout is real (no fakeout involved).
BPRO Momentum Bands suggest that the main daily volatility is playing out between 36.8k USD and 51k USD. There’s a thick demand brick based on average volatility between 36.8k USD and 39k USD. It implies that if bitcoin falls down to these levels, based on volatility it is a decent buying range on average. Conversely, there’s a supply area defined by average volatility inside 48.7k-51k USD, which rather could favor more short-term shorts than longs. It means it’s rather a poor place to open long positions there for short-term.
Big volatility (and risk) should come with intraweek breakout this week in my opinion. A strong daily close above 44.4k USD brings higher chances of 48-51k USD visit, while a strong daily close beneath 41.8k USD brings higher chances of retesting the volatility lows in the high 30000s USD.
This is a technical analysis of the case and it does not include external factors, news, media mainpulations, etc.
The middaily chart implies that bitcoin is basing currently at 41.9-42.6k USD BWAP block with a lot of indecision/sideways. The technical output here is quite simple and adds to the above mentioned scenarios.
CTF Trailer shows the main resistance for short-term and medium-term swings at Stop 45629 USD. Strong daily close above validates bullish thesis into 50k USD region. As long as BTCUSD trades beneath, there’s always a risk of visiting the orange Level Line at 38458 USD after losing BWAP orange box.
As there’s also the Level Line resistance at 44611 USD, its near location to 45629 USD adds up to create a technical cluster of medium-term resistances – the supply zone 44.6-45.6k USD. It’s not a good area to place short-term buys.
MTF chart presents a clean ranging environment of the past few days, where the price action is trapped between local pivot levels 42.4k USD and 43.8k USD, which are technically highlighted as the most important short-term levels in the chart. The range is relatively tight and hence it should be expected for greater volatility to come sooner than later.
CTF Trailer Stop at 41440 USD defines a level beneath which the bulls lose local advantage. As long as this level is held on the 4H chart basis, short-term bulls are in technical control. Lose this level with a close beneath and the roles reverse.
It seems that an upward break above 43.8k USD region enhances the chances of visiting the Level Line at 45566 USD or 46975 USD pivot resistance.
The hourly chart presents sequence of short-term range movements contributing to a larger range bound movement.
As mentioned in my Saturday’s report, bitcoin was in the five-fold range bound fractal, raising the overall uncertainty and indecision in the market. Gradual escaping of the inner ranges allows bitcoin to unfold towards the next level extremes of a larger range. It also implies that only a break outside the said ranges’ extremes is what validates short-term trading opportunities per se.
It also seems that an hourly close beneath local lows of 42.3k USD may bring higher chances of dipping further down to the lower support at 41073 USD.
BPRO Level Lines show updated supports at (USD):
BPRO pivot levels show resistances as follows (USD):
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”
Bitcoin: Number of Active Addresses (168h Moving Average)
On the onchain side, it seems that the market behind the scenes is behaving in a similar manner to what’s presented in the price chart.
No extraordinary signal or divergence has been spotted so far that would empower either side of the market – bulls or bears.
No divergence in the onchain activity seems to be in tact with the market waiting for a larger time frame consensus to arrive. The overall indecision is literal and this onchain metrcis seems to confirm the price movements on average at this moment.
Bitcoin: Net Unrealized Profit/Loss (NUPL)
As glassnode explains, this metric stands for “(…) the difference between Relative Unrealized Profit and Relative Unrealized Loss. This metric can also be calculated by subtracting realised cap from market cap, and dividing the result by the market cap (…)”
Interestingly, NUPL shows a sort of divergence between the price bahavior and this onchain metric. It suggests that the correction depth on the NUPL side well exceeds the actual price correction when comparing historical levels.
While price made a full U-turn when compared with September-October 2021 values, NUPL has gone way below reaching as low as 0.427 ratio followed by a local rebound.
It implies more upside space has been made for future potential growth. The onchain market over-extension level has been decreased while the price remains the same. It is not bullish per se, but I see it play a significant role with regards to how much the market can go up when it finally catches the direction.
The fear saga continues!
Extreme fear marked with 22 points on the index scale implies another day of extremely bearish consensus, where the crowds of the market anticipate further downside continuation and hopelessness.
I’ll repeat myself here, yet extreme fear area historically has usually been of great buying opportunity. Much more of a buying opportunity than it is for selling, at least.
It is not a timing indicator and it does not focus on predicting perfect tops or bottoms. Rather, it suggests when the market is cheap, which seems to be the case at this moment.
Crowds are usually right in the middle of trends, and usually wrong at the extremes.
Hence, unless unpredicted external factors (from outside of the crypto market) arrive to disturb global financial markets, bitcoin seems to be in a bottoming process, regardless it rallies from here or has one more dip coming in.
Despite clear contrarian thesis supporting bulls for the next weeks or months, it is NOT a go-all-in signal and should not be considered such. Risk management is key to profitability over longer period of time.
More details will be shared in the exclusive corners of the community in video report coming up.
That’s all, folks. God bless!