Daily Report – Bitcoin and Market Update (July 4 2022)
HTF 3M / 1M:
HTF 3M: The quarterly bar chart closed at the 20-period average support of 19500 USD. Accounting for the fact that it represents one of the worst recorded performance on a quarterly basis ever, I would argue that the major part of the damage is done already. As such, the mean reversion process is complete. This may be used by many long-term investors as an anchor to confirm a fair long-term purchase price.
HTF 1M: On the monthly basis there was an overall 44% price decline recorded between the peak and the trough of June. It also belongs under the category of the worst-performing months ever, for bitcoin prices. The 20-month average price is adjusted at 41500 USD level. This may act as a strong resistance in the future. The fact that bitcoin prices trade at -50% to -55% discounts against the 20-month average, this may be somewhat indicative of how oversold the market conditions are. Historical drawdown off the average to the cyclical troughs were -65% (2014), -52% (2018), -45% (2020), and -57% (2022). Within the small sample size of the data, arguably, current levels may be considered interesting for the contrarian investors.
The weekly chart has added yet another bar print below the 200-week average, which is a historical phenomenon, rarely ever seen in bitcoin’s history. With the 7-week correlation coefficient to the S&P 500 index, at 89% it confirms a strong attachment to the large cap stock prices. It is recommended to monitor the stock market prices, in order to base anticipations.
The BPRO suggests that the main breakout threshold is the Stop at $33679, in order to confirm a new cyclical bull run confirmation. However, the great distance from current prices may cause too much lag to base long-term entries on. Still, this may serve as a long-term anchor used for confirmation. Until the level is broken, the BPRO is expected to remain on the “bearish tune”.
The daily chart seems to be in near proximity to the 20-day average price.
This may be used as an anchor for the dynamic resistance, and an important breakout threshold. As soon as BTCUSD breaks above the 20-day mean, it may be considered a bullish breakout. An upwards breakout may accelerate the price to the upside, provided that a daily session closes through the average.
The slope of the downwards trending average may suggest that the trend is not sustainable in the longer run due to its great steepness. It may also suggest that a short-term upwards reversal may be due upon.
The condition remains that BTCUSD needs to close close above the 20-day average.
The middaily chart continues to trade within a range fractal, locally.
The local price action is trading sideways within a narrow price range of 18600-20000 USD. At the same time, this pattern is a part of a larger chart pattern formed between the 17500 USD low, and the 22000 USD resistance.
The CTF Trailer has adjusted downwards for its breakout threshold, toward the $21795 USD level. As long as the bulls can not reclaim this level successfully with a daily or weekly close above, the bears remain in charge and have the upper vote.
The MTF chart seems to be at the edge of an upwards breakout, based on the CTF Trailer breakout system of the BPRO. However, it’s not confirmed just yet.
The CTF Trailer Stop at 19801 USD needs to be reclaimed by the bulls with at least a bar close over it on the 4h time frame, or a higher basis.
Furthermore, relevant support levels rest at $18985 (19000 USD) and $17104 as given by the BPRO. At the same time, the BPRO Level Lines define resistances at following anchors:
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
The hourly chart has resisted to follow through the upside, over the AVWAP resistance at 19880 USD.
For a valid breakout, there needs to be either a fixed percentage (2-3%) confirmation, or a certain amount of time (e.g. 5 hourly bars, or a day) maintained over the resistance.
The near proximity of the down sloping trend line resistance at 20000-20200 USD region suggests one should be careful of validating the breakout just for the AVWAP. The round number and the trend line also should be accounted and taken into consideration. For that, I would not consider the breakout to be valid, unless BTCUSD records a daily close over 20200 USD level. Otherwise, the chop may continue with multiple whipsaws and losses.
A break out of the local consolidation range at 18500-19500 USD may imply a measured move of 1000 USD added to the breakout level, in order to anticipate a price objective. Hence, BTCUSD may potentially reach the 20500 USD level, if the local breakout is maintained.
The sentiment continues with the 14 points on the index scale. As the hopelessness develops, the more the aversion bias (prospect theory) among the traders. Eventually, a stronger upwards move may add to the cognitive dissonance, as the empirical proof (price increase) would conflict the hardened belief of vast majority of investors, that bitcoin prices are headed south. Such a form of disbelief may be a strong contarian confirmation to the upwards thesis, as the majority is always wrong about anticipating the extremes.
Bitcoin: Net Unrealized Profit/Loss (NUPL)
The NUPL ratio records another print at -0.15. While under the capitulation category, the purchases during a selling climax are usually more profitable than selling. Yet, the chances are that there might be still more pain to come for traders to fulfill the pattern of 80-90% drawdown at reversals. Risk management and portfolio diversification are essential to avoid the risk of ruin in such a market.
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