Daily Report – Bitcoin and Market Update (September 05 2022)
The weekly BTCUSD chart displays a continued instance of a breakdown below the bear flag pattern, again. Naturally, it does not guarantee any future performance to the downside. However, the fact that BTC struggles to stay above 20000 USD can be considered a major warning to those over exposed. The 200-week price resistance is at 23250 USD, and at any time BTC comes up there it may be expected to work as a resistance, due to traders’ anchoring toward that arbitrary level and order clustering. The pattern breakdown may be backed additionally by stocks selling-off, in case it occurs this week. It is, because of the strong correlation between BTC and the S&P 500 index. At 0.8 on a 7-week basis, the correlation coefficient reveals fairly strong directional dependence of Bitcoin prices on the stock market prices. An overall underperformance of BTC when compared with stocks is a valid sign of weakness. In the name of the momentum investing, the underperforming assets will continue to underperform. This may come true, again.
The middaily chart reveals the CTF Trailer continuing lower.
As such, this may prove a downwards objective of the market, overall.
The CTF Trailer Stop is now at 21127 USD, and it may serve as a valid resistance area deciding about the trend persistence or a new trend breakout.
Then, there is the range-bound pattern, clustering at 19500-20500 USD zone. A downwards breakout could lead to a technical target sell at 18500 USD. Otherwise, an upwards break may provide a more powerful thrust through 21500 USD. Yet, note the main resistance is at 21100s USD levels.
It seems that the medium-term outlooks favor the downwards thesis for BTC, as for now.
The longer tail to the downside seen as an uninterrupted CTF Trailer move south may suggest more persistence on the bearish side of the market. Note, this longer tail comes after the prior choppy periods of sideways, where the trend breakouts would come and go interchangeably.
At the moment, the CTF Trailer Stop is at 20187 USD. As long as the bulls fail to reclaim the level, the bears are in control and have the upper vote. Hence, the odds are skewed in favor of the downwards thesis.
An upwards break, otherwise, could lead to a more volatile and spectacular move up – provided that the daily session closes over 20187 USD.
However, knowing the prices are moving inside the range pattern 19500-20500 USD, BTC may need to break higher – above 20500 USD to pose any significant risk to the sellers.
The hourly chart displays yet another instance of a bullish divergence, signaled within the BPRO Divergence System.
As such, it does not promise any immediate reversal. Instead, it suggests that the prior trend (move downwards) is getting already exhausted, and over-extended.
Quite often, on lower time frames there will be more divergence signals, as there is greater noise, when compared with the trending time frames: 12h, and higher.
As there’s recently been a divergence alert, the chances are that Bitcoin rebounds off the range lows of 19500 USD, and persists higher, locally – into the range high territory.
Otherwise, there are not many symptoms of any significant technical strength in the BTC chart.
Another day in the “extreme fear” comes by.
Now, at 23 points on the fear & greed scale, BTC prices continue to consolidate within a narrow range-bound pattern.
Sentiment may offer edge and additional insight into a potential contrarian trade. The more extreme the fear, the better the contrarian odds.
Again, with the overall technical weakness of BTC,it may be expected that there is a follow through to the downside.
Most often, major trough reversals occur at the selling climax amid the most extreme fear conditions. The volatility climax has not appeared just yet.
I suggest that you remain cautious and not rush over any trades, at least for the next days.
Hope it helps.