Daily Report – Bitcoin and Market Update (September 03 2022)
The middaily chart continues to consolidate for the BTC prices.
A short-term sideways pattern has resurfaced as Bitcoin chops side to side within the 19500-20500 USD territory.
The CTF Trailer has decreased slightly, so that the main resistance level is displayed now at 21410 USD. As long as BTC continues to trade below this level, the bears are in control over the market.
Only after the bulls manage to reclaim the said resistance area can they continue to persist higher, toward the 23100 USD levels. Until that happens, bulls do not have the upper hand in the market, and can be considered vulnerable.
It seems that the better odds are for the bears to follow through lower – at least for now.
It seems apparent that there is a longer tail to the downside for the medium-term BTC outlook.
This suggests an actual persistent movement downwards with consequence and follow-through. This is a trend, which kicked off at the moment of losing the 24000 USD support, following the choppy sideways period before.
As such, the 24000 USD level should now turn into a technical resistance, on the way up.
For now, though, BTC must break the CTF Trailer Stop at 20588 USD, in order to prove any signs of strength from the buyers.
Until that happens, the bears are in control, and even the sideways pattern forming right now can rather be considered a continuation formation, than a powerful reversal to the upside.
However more likely the odds are to continue lower, the traders should remain cautious and follow the breakout directions.
The hourly chart gives a more detailed look inside the consolidation pattern within the 19500-20500 USD range.
As such, it can be expected to be filled with bullish and bearish divergences, as it follows the mean reversion principle as prices chop around the mean.
For now, there are no promising symptoms of reversal coming up. BTC is now trading in the mid-range territory, while it’s not showing any directional preference.
Typically, such moves are often filled with a lot of noise, where the Kaufman Efficiency Ratio is at fairly low levels. This happens whenever there is little trend (direction) in a movement.
More often than not, such movements encourage mean reverting movements, whipsaws which trigger stop losses on both sides of the pattern, as well as short-term plays for highly leveraged traders trying to gamble.
This doesn’t seem like a good environment to be over invested in BTC, for now.
THe “extreme fear” saga continues, again…
Now, at 21 points on the scale, there seems to be more conviction about the downwards continuation for the Bitcoin prices.
As such, the sentiment may not be considered a trading indicator, per se.
Instead it may offer edge and additional insight into a potential contrarian trade, in the opposite direction than the majority of the market would expect.
Typically, the more extreme the fear, the better the contrarian odds for a profitable position trade.
Ideally, the market sentiment is a source of valuable data over long-term trends, and not immediate market reactions.
With the overall weakness of BTC, when compared to other risk assets, e.g. S&P 500, it may be expected that there is a follow through to the downside, additionally backed by the bearish expectations of the herds.
Most often, major trough reversals occur at the selling climax amid the most extreme fear conditions.
I suggest that you remain cautious and not rush over any trades, at least for now.
Hope it helps.
P.S. In my yesterday’s webinar I explained why traders should additionally focus on capital preservation, mostly, than any aggressive market decisions. Catch up with the link below.