Daily Report – Bitcoin and Market Update (January 5 2022)
Middaily candlesticks reveal another day of intraday consolidation in a very narrow range.
Candles are marked with the black color from BPRO which suggests it’s not a technical strength evidence for the bulls and that it is trading beneath key arbitrary resistance.
One of the main resistances I would look at is CTF Trailer Stop at 49225.5 USD. Ever since the corrective movement started mid November 2021, CTF Trailer has been the main resistance which, if rejected, would be followed by further downside continuation. It is hence a very important technical indicator. A successful close of 12h, 1d, or 1w candle through this level would be of enough technical confirmation for a trend reversal and upside pullback wave starting.
Currently, bitcoin is basing within 45.5-47k USD demand block provided by BWAP – variation of volume-weighted average prices.
In other words, as long as BTCUSD trades beneath 49225.5 USD threshold or reclaims it, bitcoin remains in the 42-52k USD consolidation and lack of momentum.
MTF chart reveals a more concentrated price action within a narrow range 45.5-48.5k USD.
The consolidation between 42k USD and 52k USD boundaries seems to be contracting in size more and more as we continue, which implies that a more explosive movement is due. It’s easier to understand if you imagine that the market (and volatility/risk) pulsates or “breaths”. It means that after every breath-in, there’s a breath-out. Per analogy, after every move of narrower range, there’s a breakout move of expanded size. At times, it takes some more time than usual to expand into a proper breakout and the range may continue for days, weeks or months (or years – stocks, commodities, etc.). It is then logical and fair to expect a larger volatility move to come sooner than later. Larger volatility means greater risk and greater chances of losing money when one is stuck trading the chaos inside the range.
CTF Trailer Stop is 47661 USD and this is short-term invalidation level for more bearish narrative we’ve been seeing for the past few days. In case of a break above and close-through that level, this may be an early warning about a larger upwards trend developing.
Currently, bitcoin is attempting to breach the BaseLine average combined with BWAP volume block resistance. It means that if there’s a strong close through 46.8k USD, the next stop may be imminent 47661 USD.
If that is in fact the case, then the next resistance is the High Momentum Band of BPRO. It’s a volatility based supply zone at 48.5-48.8k USD. A proper daily close through can be considered an early indication of a larger reversal, THE bounce, even before 12H CTF Trailer Stop at 49225.5 USD is breached.
Because 12H CTF Trailer Stop at 49225.5 USD is more important technically than 4H CTF Trailer Stop at 49225.5 USD, it is preferred to see bitcoin break 49225.5 USD definitely.
In case of a failed breakout, there’s a statistically significant chance of visiting the volatility lows at 44.5-44.8k USD.
The hourly chart shows off continuation of almost random oscillations in the horizontal direction. Every breakout attempt is faded and faked soon after – the same as every breakdown is faded and intraday shorts are trapped. There’s a lot of chaos, directionless movement. The longer it lasts, the more depressive sentiment it generates as traders start disbelieving the “trend” ever changes. This is nicely explained by the behavioral finance, prospect theory and perception bias called “saliency”.
As mentioned in the chapters above, a proper close through CTF Trailer Stop validates a breakout in its defined direction. In other words, a breakout with 1h or 4h close through 46847 USD (invalidation level for local bearish thesis) increases the chances of upside expansion.
BPRO Level Lines show updated supports at (USD):
BPRO Level Lines show resistances as follows:
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: Mean Hash Rate (168h Moving Average)
Here’s what I wrote on Monday about this onchain indicator for bitcoin:
“Hash Rate averages to the historical highs in a clear upwards trend ever since bottoming out in June-July 2021.
Because it is defined as “The average estimated number of hashes per second produced by the miners in the network”, it means that miners are the most engaged ever in mining bitcoin. It is a bullish tendency on the onchain side.
As bitcoin price tends to decline or moves sideways while the hash rate increases, it is fundamentally positive “divergence”
Overall, a good sign of health of the network behind the scenes.”
UPDATE: The hash rate mean has got some local boost which is a potential setup for new historical hash rate ATH levels. Of course, there’s a limitation in applying certain technical mechanisms directly laid onto onchain indicators. Yet, the trends never lie and there’s a strong upwards tendency for bitcoin in terms of the hash rate average.
The sentiment has worsened and become extreme fear at 24 points back again.
As long as the hand shows an extreme level (extreme fear/greed), it is usually worth to position oneself as a contrarian with the opposite expectations.
Historically, anytime bitcoin visited extreme fear environment on the index, sooner than later we have seen upwards reversals.
Again, it’s not a timing indicator so it is not fair to expect it to show you perfect top or bottom.
Because the crowds are usually right in the middle of trends and wrong at the extremes, this sentiment measure conveys a message for when an asset is cheap (extreme fear) or expensive (extreme greed).
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