Daily Report – Bitcoin and Market Update (July 05 2021)
Weekly candle closed over 35k as a spinning top candle showing nothing but lack of interest from traders. ATR suggests that last weeks are of lowest volatility since November 2020 when bitcoin was still trading below its 2017 ATH. Momentum and trend wise BTCUSD is deeply oversold confirming other signs of capitulation-type movements in past weeks. Whenever market has got massive hit (capitulation), there’s PTSD period where majority’s sentiment suggests market is never going to recover. From macro perspective, period of no interest after severe crashes is called depression/capitulation/anger. Market is always right in the middle of a trend, but ALWAYS wrong about the extremes. Retails tend to get overly bullish on peaks and overly bearish on bottoms. Seeing $1-5k BTC targets in comments under my tweets allows to classify that as exaggerated bearishness. Price action wise, the market looks like 6-month long Head & Shoulders pattern. Historically, when the patterns are too obvious, they have already been discounted by the market. Especially, when these patterns last for 6 months. Most of the time, such patterns tend to make inexperienced traders short the right shoulder of H&S before it even forms OR short right into the support hoping for the breakdown. After massive discount on the market (-50-60%), it is usually are of interest for big players (also Fibonacci based retracement level of the range). So from the HTF point of view, I would expect H&S breakout failure and upside continuation to say at least. Of course, I do not have a crystal ball and any chart pattern, scenario may be easily disrupted by a slightest news from FED or Elon or any other unpredicted black swan event. H&S pattern is invalidated with weekly close over 40k and then expected to visit 45-50k region, which is confluent with indications from BPRO.
Daily picture is cleaner when applied very simple technical overview. Currently trading below its 200 day average with intensified volatility in the downside direction. Numerous other indicators based on onchain analysis and not only, suggest that there are very high chances that the capitulation phase of the crash (selling climax) has already happened. True or not, we are in the process of reverting to the mean. Fair price of bitcoin based on it’s long-term averaged price suggests is 44-45k. Therefore, any short-term move below that average suggests it is rather a buying than selling opportunity. Knowing that weekly close over 40k would also invalidate 6-month pattern, it could indicate that this mean reversion process would rather have long-term implications. It means that at one point in not distant future, BTC should be fairly trading around 44-45k usd levels. It DOES NOT MEAN instant effect and that if BTCUSD does not reach 45k in 5 days 5 hours and 5 minutes from now, then mean reversion is a myth, scam, wrong, etc. Time series data (risk-adjusted returns on an asset, or price action) oscillates AROUND the average most of the time. It means that whenever it is too distant in extreme deviation over the average, it is bound to revert to the lower fair averaged price. Similarly, whenever the move is showing abnormal downside volatility below its average, at one point – sooner than later – it should be trading near/over the average as well. That’s not opinion. That is a statistical fact known from primary school grades.
Middaily closed an ugly-looking candle right below the baseline average after rapid early morning selloffs (Asia hours) yet no bear trend change indication yet. No matter what happens inside 30-43k range, it is NEUTRAL. Not bearish, not bullish – just neutral. I feel like Im repeating myself for the 100th time already but it is fair as we’ve stayed inside the very same narrow territory for 48 days already. BPRO levels remain the same: Breaker Low 31554 is the last bullish bastion and ugly weekly close below that level may POTENTIALLY (limited probability) suggest to get ready for sub 30k levels (perhaps 25k region). As long as we trade over that level, there’s technical hopium for bulls while balancing at the very thin edge. Volume based resistance cluster remains the same: 40.5-43k and inside this area you may anticipate intensified selling processes. Once broken and reclaimed with weeky close over that zone, bulls continue to higher targets as follows: R2 45k R3 + Breaker High 52054-53334 Once the last cluster is broken, bulls may expect ATH retest attempt. Until all that happens, do NOT over trade any price action inside this dull range. Even best setups, patterns, candle formations will get disrupted against your will and predictions. The range is NOT technical trend. It’s chaos full of traps.
MTF picture continues upwards on average based on its volatility bands. Current volatility based range is 32-37.5k (LTF) and 30.2-39.2k (MTF). It suggests that with highest chances the market will continue trading inside 32-37.5k region in next days. Currently on the bearish side of the “trend” below the BWAP support which now turns into resistance combined with the baseline 34.5-34.7k. Breaker High 39390 suggests the market starts uptrending after daily close over that level as it would align with potential upside range breakout. Breaker Low 31420 means the market may continue towards 30k if closed the day below that level, which intensifies the risks of pushing lower in case of FED, Elon, FUD news coming. Not suggested to trade the range other than: 1. Buying range lows 28-30k 2. Selling range highs (40-43k) 3. Buying breakout RETEST over 43k 4. Selling breakdown RETEST below 30k
Hourly picture displays classical definition of sideways price action. Good-looking candlesticks sequence gets easily disrupted with massive downside candles out of nowhere. Similarly, bad-looking candlestick patterns get bullish breakouts in the most unexpected time and place. Currently on the bearish side of the short-term range defined as 31.8-37.3k region based on volatility. Breaker High 35656 is last bearish short-term bastion and if a daily session closes above that level, we should see push into 40k area. Breaker Low is 32286 and similarly, if this level is broken down with daily close below, there are high chances of retesting 30k level. Currently RSI is displaying oversold momentum locally after getting overbought gray area yesterday around 36k levels. Volatility range for the next weeks is 30.1-39.1k.
It seems that we’d just seen active addresses onchain capitulation larger that in March 2020 black swan crash. Currently we’re looking at rapid recovery (100% increase), which may stand as early warning for bears. I would not consider it buy signal per se, but definitely I would not feel comfortable shorting these low levels with such spark symptoms which may evolve into something bigger quite fast.
Today’s 29 points on the fear scale, which continues to be the longest bearish sentiment period in years. Even in 2018 bear market miners capitulation, the fear/greed index showed less fear than now. If you look at it, retail investors have claimed the market is dead for 48 days already. It is unprecedented event and somehow the market refuses to die and crash to zero as many would hope to see after missing out or losing big money in past months. Retails love to think that if the lost money on an asset (BTC, stocks, commodities), then it means the asset’s fair price is zero and it “deserves” to be crashed. Makes me smile every time. Historically, no matter where the bottom is to the pip (my guess is bottom’s in but I dont have a crystal ball), it has always been way better deal to buy than sell into the fear. The range has been taking so long to unfold that people forget it’s still neutral in its own pattern. Patterns are always neutral and what adds to their bullishness or bearishness is their context. Here the context is showing 50-60% capitulation down spikes, abnormal downside volatility and sideways after that. Sideways after small declines is for continuation. But sideways after MASSIVE/abnormal declines is for accumulation. Fear/greed indications and sentiment seem to confirm that.
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