Daily Report – Bitcoin and Market Update (May 23 2022)
The weekly chart has got yet another close over the main support level, validating the demand area one more time, so far.
After the recent market crash and overall crypto turmoil, BTCUSD recorded a lower volatility week, which was to be expected. Typically, after an abnormal volatility session, a sharp decline in the volatility indicators appear, as the market shakes off its selling frenzy.
As long as the weekly chart presents no close below the $28800 support, I would argue that the bitcoin bulls have higher chances for bouncing off the lows in the following days.
On another BTC closed another week in the red, marking one of the longest (if not the longest) run of consecutive red weeks in its price history. Additionally, the weekly bar closed as an inside bar pattern, or a harami candle formation. While this is not a guarantee of reversal, it is often perceived a strong signal for a reversal, especially after long selling-off series.
The 50-week mean price is at $44324 for now and due to the mean reversion principles at one point in time bitcoin should be trading back around this level sooner than later.
While seen at the historical highs for its 7-week basis correlation coefficient, bitcoin presents very strong dependence on the equities prices movements. For more bullish bitcoin reactions, I would argue that the stock market’s strength needs to be apparent, as well.
Finally, bitcoin has hopped back inside the 28.8-65k USD chart pattern, confirming two fakeout setups – one on top, and one at the bottom recently. The pattern, hence, should be still perceived relevant, valid and considered consolidation in the bull market, rather than a bear market (lack of breakdown confirmation). Mind that failed patterns tend to perform better in the opposite directions than anticipated.
The daily chart is attempting to reclaim the 20-day Baseline average for the first time since the 40000 USD breakdown.
While moving in a sideways price action series, BTC seems to have bounced strongly off the volatility lows at the $25000 region. A successful close outside the 20-day mean, bitcoin would gain more chances for an upwards continuation toward the High Band region given by the momentum and volatility readings at 36000-38000 USD.
Price action analysis implies that a local breakout should be considered confirmed if BTC closes a day above the $31200 resistance, which has marked the supply pressure till now. Such a breakout could cause a cascade of over-leveraged shorts liquidations (protective stops aggregation at $31200), forcing those to covering in loss, buying back higher and potentially cause a more explosive movement to the upside.
If such a close occurs, a follow-through to the upside could be triggered, potentially aiming for $33500 retest.
The middaily chart seems to confirm the objectives given in the daily chart analysis above.
The CTF Trailer displays its main breakout threshold, which needs to be reclaimed with a daily close above, in order to initiate a new, upwards trajectory for BTC. The threshold Stop $33510 seems to align very well with the Momentum Bands region, defined by the momentum and volatility.
Therefore, a solid breakout through the upper boundary region given above, could bring a more spectacular follow-through to the upside and this would be the first factual instance of an upside breakout since the market peaked in November 2021.
For now, bitcoin trades outside the Baseline average, boosting the chances for an upwards continuation into the $33500 resistance. Otherwise, a failure to maintain the mean could result in a sell-off into the Low Band area at 26000-27000 USD.
The MTF chart has triggered the first upwards tendency breakout in a while, since the 38000 USD breakdown.
The CTF Trailer has been breached with three consecutive closes outside it, which has contributed to the “upwards bias” shift, locally. As a result, a new short-term upwards trend may be initiated, as long as the Stop $28902 is protected by the bulls.
As always, the CTF Trailer breakouts do not confirm an immediate price reaction, a massive pump or a massive dump – neither of those need to actually happen. However, it brings certain shift in the market for the underlying strength transfer. The bulls have re-gained the control over the market, at least in the near-term.
Meanwhile, the main Level Lines support is adjusted to $29758, whereas the main resistance is marked at $37677. As long as Bitcoin trades above the $29758 level, it technically is more attracted to the upside objectives.
The hourly chart continues to show a directionless, choppy movement of prices with no trajectory selected for good, just yet.
Despite the local increase in prices, bitcoin has yet to establish the main-short-term break outside the $30660, which seems to be the most relevant near-term resistance. So far, there have been plenty of rejections and the supply pressures above this area.
It could be expected that bitcoin will not be confirmed for a thrust to the upside setup, as long as the level is not reclaimed. For this reason, it is also likely that intraday throwbacks into the 29700 USD area can happen.
Furthermore, the resistance defined by the BPRO Level Lines are given 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”
The pessimism continues to show on the retail spectulators’ side of the market.
The fear/greed index reading is now at 10 points on the scale, which adds yet another day to the extreme fear environment in the markets.
While this is not a timing indicator, it often lets the reader understand how “cheap” or “expensive” given asset has become, perceived through the contrarian lense.
As the behavioral finance learns, traders tend to be wrong about anticipating extremes.
I have recently added six figure positions to my long-term bitcoin spot holdings based on historically low sentiment readings, as well as a small leveraged position on the futures contract, relying on the same principle. After the daily close, I may consider adding one more batch to my long-term holdings.
While the past is never a guarantee of future performance, the historical records prove that buying into extreme fear sentiment has been more profitable than selling into such, over time.
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