Daily Report – Bitcoin and Market Update (January 26 2022)
The middaily chart displays BTCUSD price action following a 15% bounce off of the 33000 USD lows. There are several promising indications to mention.
Firstly, BTCUSD is trading above the BaseLine average after quite a decent middaily candle closed through. The BaseLine is providing a firm support at 36800 USD level.
This level is additionally backed by BWAP demand block within the 35.9-36.6k USD area, which overall creates a cluster of supports between 35900 USD and 36800 USD. In case it is lost with a 12H or 1D close below it, there is a chance of retesting the volatility lows defined by the BPRO Momentum Band at 31.6-34.2k USD layer.
Momentum Bands are derived from standard deviation based volatility changes, which implies that bitcoin is most likely to trade between 31.6k USD (Low Band) and 44.4k USD (High Band). As long as bitcoin trades above the BaseLine, It is more likely to reach the High Band than the Low Band, hence, targeting 41.8-44.4k USD supply.
The most important level in the chart is defined by the CTF Trailer Stop at 40365 USD. It is a level break above which suggests the end of the entire 2-month long correction of the 50% depth. As long as BTCUSD remains under 40365 USD it is a subject to retest the lows area.
MTF chart shows off a decent upside pullback consequently closing higher candles. It’s a positive and potentially promising symptom for a further upside recovery.
Bitcoin is trading above its BaseLine average (ascending), which provides traders with a dynamic support – now at 36800 USD level.
The said support is additionally backed by BWAP block defining volume-based demand zone 36.3-36.6k USD. Both combined create a demand zone between 36.3k USD and 36.8k USD.
Price action implies a strong demand block (BaseLine Wave Pivots) at 35-36k USD region.
Because the levels said above are nearly located, one may consider this a certain cluster of supports and demand block, entirely between 35000 USD and 36800 USD. Quite a thick brick and it doesn’t make an impression to be easy to break down, except for external fundamental factors (see FOMC discussed below)
Additionally, short-term upwards reversal is freshly confirmed by break and close above 4h CTF Trailer resistance. Now bulls have the upper hand in the short run assuming no external factors disturb here. Invalidation from the TA part for the bullish bitcoin LTF setup is given at the stop box in the bottom part of the chart: 34463 USD.
The hourly chart displays a local upwards trend attempting to reclaim a Level Line resistance at 37769 USD and make a support out of it (polarity change principle). A successful daily close above it suggests that the next levels ahead to be tested are the upper Level Lines marked in the upper part of the chart. All Level Lines supports and resistances are listed below.
Key price action swings print the main support level locally to be 36700 USD and it is additionally backed by entire zone of demand between 36000 USD and 36800 USD. Hence, the entire zone 36-36.8k USD should be considered a cluster of supports.
BPRO Level Lines show resistances at:
BPRO Level Lines show supports at:
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”
FOMC Press Release Note
Of course, all eyes on today’s FOMC meeting revealing rate hikes plans and balance sheet runoff map. If it’s immediate and in-rush plan from FED, then stocks may take another hit (which would be quite strange and painful to US after 20-50% declines already) and bitcoin could go down with it. Today’s FOMC press release is scheduled to start at 2pm EST with the main details to be revealed around 2:30 pm EST (8-8:30pm CET). At these hours, it is likely the financial markets could see a greater volatility (and risk), so I would recommend so that you do not have/open too many positions. It may be dangerous to have only risk-on focus in case what FOMC announces is worse than expected for the economy.
Usually, price of assets tends to grow in the anticipation of the news (here: FOMC press release). It suggests to take an additional caution of increased risks of local flash dumps should the actual news be of more negative impact for the financial markets. It is due to the fact that the potential decline may be additionally a result of locally over-stretched upwards movements (overbought intraday conditions). Simply put, because (potentially) the risk-on assets may increase in the anticipation, the drop may be heavier than if there was no growth prior to it. Just another reason to take more safety-focused approach here.
The rate hikes concept includes likely 3-4 interest rate liftoffs over the course of 2022, starting off in March 2022. During the previous rate hikes around 2017-2019 periods, the actual rate hike events were followed by short-term downside-oriented price action soon followed by a larger price increase. It may be the case indeed, that what we hear today from the FED may bring short-term bearish implications (but it is not 100% certain at all), followed by medium-term strong increases. It is also worth adding into the larger context, that bitcoin has freshly taken advantage over the equities and while the stocks tumbled down, bitcoin took off to the upside.
Personally, I would be surprised if the FED takes a destructive approach towards financial markets today for a couple of reasons. Primarily, it just looks bad on the politicians that the stock market collapses during their career. Secondly, the market has been in heavy declines since mid November with indicators oversold across the board. Some of the indicators are even worse than during the covid crash in March 2020, taking us back even to 2008 recession times. Wild. Finally, VIX as the fear index coming from the Implied Volatility coming from the demand for the S&P 500 Put Options (represents the market’s expectations for volatility over the coming 30 days), is at relatively high levels, which usually has short-term bullish implications to follow.
With the extreme fear marked at 23 points on the scale, the fearful saga continues.
The majority is usually right in the middle of trends and usually wrong about the extremes. At times one needs to wait longer than preferred for a bitcoin bottom to form, but the history suggests every time bitcoin was this oversold, it was followed by a proper bounce and profitability soon after.
Importantly, it is NOT a timing indicator. It suggests when bitcoin is considered cheap or expensive. For the past days bitcoin has been suggested as a historical buying opportunity based on this indicator. It does not aim at predicting bottoms or tops. Usually, though, after flashing so oversold market conditions, bitcoin followed up with consequent bounce off of the index historically low readings.
It aligns with the equities sentiment too and potential setup for recoveries for both industries.
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