Daily Report – Bitcoin and Market Update (November 24 2021)
The middaily chart is showing off a consolidation below the key supports in a local short-term downtrend. Is that immediately bullish? Not really. Does it mean 50000 USD support is next level to bet your entire networth on? Not necessarily either. There are a few reasons for it.
Firstly, price action wise, we are talking about short-term BTC correction lasting ever since November 11th when Evergrande FUD came out to disturb the financial markets stability worldwide. Any price action horizon under three weeks is considered short-term and hence irrelevant from the high timeframe perspective. It naturally has only short-term implications and never a short-term signal/weakness will imply long-term primary trend reversal. Peak to local trough retraces as much as 20% and as explained in my Monday’s report, it’s completely natural and normal. Let me remind that bitcoin tends to present investors typically with a few types of corrections:
LTF 10-20% retracements (typically 15%)
MTF 30-40% retracements (typically 35%)
HTF 50-90% retracements (bear markets)
One may conclude then, that based on statistics and historical records of bitcoin’s volatility, current short-term movement is rather oversold, over extended and due for an upside correction. It rarely ever to never happens that BTCUSD keeps dropping with no upside pullback. Locally, bitcoin is consolidating between 55k and 60k in a chaotic sideways of low momentum with a little bit more selling than buying pressure. Selling comes from the retails side panicking (fear sentiment) aka weak hands, while local intraday 2-3k range market buying candles come from whales. It should be obvious whales are not sellers after 20% declines but are rather the very reason that the market reverses on top to start with. Knowing this move is hence over extended and oversold, I’d not be eager to place short-term sells or short sells if I were you, especially that it’s at the very support with a lot of local bullish fakeouts (accumulation).
Volume based levels are presenting what follows:
60233-59003 LTF aVWAP resistance cluster
49983 MTF aVWAP support
It feels as if there was a need for one more final shakeout, perhaps targeting 50-53k region to flush the liquidity and make the clean space for large money to step in (classic liquidity engineering). Regardless of this happening or not, 20% retracements are usually decent buying opportunity for short-term traders. I’d not dare argue bitcoin’s historical records.
On top of that, BTCUSD is trading clearly below the said 59-60k aVWAP supply zone, which suggests that bitcoin is trading below it’s fair value right now – undervalued.
Worth having spare cash to catch dips in case unpredicted FUD news comes out of nowhere, but I wouldn’t bet my strategy on getting those levels. It requires luck here.
MTF wedge has yet to see it’s proper breakdown retest after successful downside breakdown. It seems that locally bitcoin has been trading sideways for the past couple of days and it seems to remind an incomplete descending triangle pattern – incomplete means it can change at any time and evolve into another pattern.
Typically, descending triangle chart pattern serves as a continuation pattern more often than a reversal pattern, but as Bulkowski claims it breaks upwards 53% of the time. For the said reasons, I don’t personally see it as a source of profitable short selling trigger, especially that it’s not even confirmed/complete yet. Food for thought about risk/reward approach.
Volume profile analysis of the leg down anchored at 69k ATH levels suggests two main volume blocks:
63.5k-65k as main resistance zone (wedge breakdown on decent volume – valid breakout confirmation)
59.5-60.7k as local resistance area (backed by MA200)
Those areas above would work as the main obstacles on the technical chart of bitcoin in the upcoming days with less than a week to close a month.
For now MA200 is trending mildly downwards first time since mid September when bitcoin was trading at 40000s USD. As long as it does, MTF trend is officially under short-term correction.
Hourly chart suggests clear local downtrend with chances of 5-wave trend completion. If only local bearish pennant between 17th and 18th of November had been a bit longer or a bit more upside oriented, that would be out of question to me. One way or another, whether one more down shot left or not, there’s not much time for bears left here.
Sideways movement we’re currently in is showing thick volume bricks between 57.3k and 59k USD which can be considered local congestion area that once broken to the upside, it will accelerate upwards pullback significantly.
MA200 (the black curve) is trending down pretty straight forward signaling short-term bears’ advantage over the bulls. Based on the mean reversion mechanism, bitcoin will find its resistance at 58000 because of MA200, which additionally confirms the importance of 57.3-59k region defined by volume.
Trendline pattern conducted downwards through subsequent lower highs starting from the peak suggests that BTCUSD may find resistance at 59.5-60k area which over the time will find full confluence with the said 57.3-59k region.
Sideways movement is not even a trend. It’s neither bullish, nor bearish by nature. It’s not the pattern that defines the bullishness of bearishness but the context. The context reveals short-term perspective and that bitcoin has already expired it’s regular (historical) range of LTF corrections (10-20%) so short selling or selling the support levels at 55-56k region makes it simply a poor choice based on risk/reward measures. It doesn’t mean it’s impossible to make money downwards. Instead, it means that it’s simply a bad deal and poor choice for little reward and high risk of being wrong while in short. That’s the way I read it.
As always, for chart patterns and range trading I suggest the following strategies.
- Inside range trading (buy range lows or sell range highs)
- Outside range trading (buy the breakout retest or sell the breakdown retest
- Do not trade the range at all and wait for the trend to come up.
Bitcoin: Number of Active Addresses (168h MA)
Definition: The number of unique addresses that were active in the network either as a sender or receiver. Only addresses that were active in successful transactions are counted.
168h MA meams it’s a weekly average added over an hourly chart to show off smoothened short-term fluctuations.
Per the onchain metric, the market has seen a local decline in the active addresses average which confirms a healthy correction. Nothing unnatural in it is what I’ve found. Alignment for both price and onchain metric suggests no upwards reversal signals, divergences based on this onchain indicator so far. This hence leaves the room for a potential 50-53k flash crash to wipe out weak hands out of the market. But the chance doesnt mean it’s highly probably, not to mention that happening in one shot is rather highly unlikely. Caution is advised regardless. It doesn’t seem like the best spot to make bold moves or big size trade entries just yet. Not worth over expoisng yourself to futures, especially on altcoins where the market is clueless.
Bitcoin: Number of Active Addresses (50d Moving Average)
A bit different angle of longer term average applied suggests and confirms that current local downtrend on price and onchain is a temporary short-term correction with no reversal signals from the high- or even medium timeframe point of view. It’s a strong upwards trend
Sentiment classified still under the fear category at 42 points on the fear/greed index scale. It’s improved compared with the day prior of 33 points. I’ve got the impression again, that we’re missing this potential one last flash drop to wipe out the weak hands and build enough liquidity compression for the large players to step in on a market discount. That said, Im personally not making any moves as I’ve recently been long since 29.6k and 40-41k and Im not rushed to make any changed about it. It seems overall, that it’s not confirmed for an upside reversal just yet, but already rather too late for decent short-selling entries for short-term traders. MTF-HTF traders should not be worried even for a second about it. If you are pressed to make a move, then I highly suggest you reconsider that no position is also a position. As technical traders you should wait for technical triggers to enter or exit the market. None has really arrived well just yet over the past hours-days. You have to wait for it. As simple as that.
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