Daily Report – Bitcoin and Market Update (May 14 2022)

By Cryptobirb

HTF 12H:

The middaily chart has so far shown a significant demand lying in the books under the 28000 USD support. While this may be a subject to change, BTC had already seen a violent crash, liquidations, and selling climax.

After crashing into the 25000 USD support, bitcoin has bounced off the lows and managed to reach the resistance of 32000 USD – one of the supports prior to the crash. However, the main resistance level is yet to be attempted.

The CTF Trailer has naturally adjusted downwards, creating the most relevant technical breakout level for the 12H time frame. For this, I consider it a relevant level for shorter term traders, and – once broken – leading to longer-term implications. The CTF Trailer Stop is at $33639 and it is the main invalidation level for the bears. As soon as bitcoin breaks above the threshold, the bulls re-gain control over the market with higher chances of following through to the upside.

Otherwise, bitcoin remains in the danger zone, unless a weekly close through the prior support of $28800 is broken through. A weekly close above that level would confirm that the levels lying under the support have been demanded as the market was buying into the lows. This could potentially trigger a recovery rally. However, it is too early to confirm that, before the week close.

MTF 4H:

The MTF chart has retraced off the 31000 USD highs, locally and bitcoin is not attempting to build a base at the low 29000s USD.

The CTF Trailer confirms the main flat resistance to breach for the short-term traders is $31359 for bitcoin bulls. If this level is reclaimed, there are higher chances of recording a follow-through to the upside. Until that happens, I would expect bitcoin to continue trading sideways for a moment, within a range defined by the volatility.

The Momentum Bands imply the volatility range for the next sessions to come. According to the Bandwidth, the 26800-32800 USD zone is the one bitcoin theoretically should find most likely to trade within. It may be assumed that the chances are bitcoin would revisit the lows of 26800 USD at one point, and it would still be within the “healthy” projected volatility, without further consequence to the trend or prices.

A clean break outside the Low Band or the High Band may lead to a volatility breakout, if there is a higher time frame close through either of the boundaries given for the range. Such a volatility breakout would bring higher chances of BTC to continue to trade in the direction of the breakout.

LTF 1H:

The hourly chart suggests a local failure to break outside the bullish pennant pattern through the 31000 USD resistance. While this is not decisive, it would have been good-to-have for the bulls.

The failure to break outside the pattern to the upside raises questions of the bulls’ persistence and it may seem that bitcoin is not yet ready for the push and follow-through to the upside, against the bullish favors.

Prior to the pennant pattern, there was an instance of inverse head and shoulders pattern, where the head is the very trough level, with both of the shoulders marking lows around 28000 USD. A clean break back below the 28000 USD is a clean invalidation and a failure to the head and shoulders breakout, which led later to the failed pennant.

At the same time, the downwards trend line would be broken back below a key threshold level – the support of 28000 USD. It is worth noting that failed patterns tend to perform better in the opposite direction than anticipated based on the pattern itself. A breakout failure, hence, may lead to aggressive and violent move against the pattern traders. For this reason, it is suggested to consider tight & well-defined protective stops and reasonable money management.

The BWAP resistance block is formed at 29.8-30.2k USD zone, based on the price and volume factors. A clean break above the region potentially may lead to upside acceleration. Otherwise, bitcoin may search for lower price targets.

Overall, the BPRO Level Lines show resistances at:

40034
37859
35499
33403
29413

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”

FEAR/GREED INDEX:

The panic state seems to be at its climax levels.

While the fear/greed index is not a timing indicator, and should not be expected to be such, it is worth nothing the fear extremity has now reached 9 points on the scale. This is the first instance of such seens since the very bottom of the COVID crash in March 2020, or the bottom of the 2018 bear market. Of course, the past data is never a guarantee of future performance, yet, it is still worth accounting for the amount of irrationality in the market right now – rarely ever seen.

The contrarian traders may consider current levels of bitcoin to be “extremely cheap”, accounting for the past fear/greed index readings at the market troughs in the past, within the bull market cycle.

As traders, we all undergo emotional processes and perception biases, which distort our reality reading skills, due to cognitive biases – faulty reasoning, human errors, and emotional biases – driven by fear and greed. Regardless of the type of the bias, every time such a bias can lead to a mistaken conclusion regarding the market performance and cause irrational decisions.

Due to the saliency or representativeness bias, traders tend to believe that the trends last forever. If the market had been trending downwards, the fear climax comes with the greatest deal of traders believing it would continue this way forever. An inverse case may be explained for the upside trends, leading to irrational exuberance and excessive spending at the market peaks in euphoria.

Statistically speaking, the longer the downwards trend lasts, the lower the chances for the downwisde continuation, because, as the theory of runs explains, the probability decreases sharply the run of many losses will be sustained. Again, an inverse case may be applied for the upwards trend instances.

Finally, this thorough explanation is to serve traders’ rationale and enhance logical analysis and reading of the market, so one can have higher chances of winning and benefiting from it.

I hope this helps. God bless all.

P.S. If missed yesterday’s emergency webinar regarding BTC, LUNA, UST and market analysis, catch up below.