Weekly Recap – 02-26-23
Top 5 by MCAP
Although this recap is mostly about Bitcoin, it’s still important to discuss the overall health of the Top 5, as numbers 2-5 have sway in the altcoin world. What a rollercoaster ride we have seen since the end of December. Bitcoin and friends have steadily risen, with a few pivotal points relaxing and consolidating. Bitcoin has met, challenged, and overcame some very significant levels. The market as a whole is at odds, with some coins trying to navigate their own path and others following Bitcoin with a distant eye.
Bitcoin Monthly - Long-Term
February has little time left before it shuts down its Monthly Candle. For now, February is Green. However, Bitcoin is only a few hundred dollars away from turning February Red. Worse, the High from February nearly matched the High from last August. If we are to close Red, analysts and investors may be convinced that February was nothing more than Double Top. If that were to be the case, further downside would be expected. If February is to close Green, some traders may be willing to overlook the Double Top for now, as momentum is currently with the Bulls locally.
Bitcoin Weekly - Mid-Term
The most severe issue for the Weekly chart is the potential Double Top. After trending from lows, a Double Top happens when a rallying High fails to beat a previous high and gets rejected at or near the same level the original High failed at. In his scenario, we are explicitly talking about a structure High ha was up in during the Week of August 15h, 2022. What makes this situation even less appealing is that the level was tested and rejected for two weeks in a row. This forms yet another pattern called a Tweezer Top. This is when two candles beside each other have wicks that attempt and fail near the same level. The difference is $32 for an asset that trades near $25,000. That is basically no difference at all over 14 days of trading.
This is a double win for the Bears, BUT there’s more. The Bulls have two really important things going for them:
1: Local trend reversal
2: Major Structure break that flipped resistance to support
These two things, plus that year-long downtrend, may be enough to send traders buying, if for no other reason that they finally have something to look forward to potentially.
Bitcoin Daily - Short-Term
The Bitcoin Daily chart offers a close-up view of the Tweezer Top on the Weekly and an actual Bullish explanation for Bitcoin. The first view we will look at is the Moving average view. This is essential because it offers an explanation and confluence to the areas of Support and Resistance. For starters, Bitcoin has reclaimed the order of the 20, 50, and 100 EMAs. Notice the struggle of Bitcoin with these EMAs over the last year.
Next, bitcoin has reclaimed price action above the 200 EMA Daily for the first time in almost a year. This is a massive step for Bitcoin and can sometimes be noted as the beginning of a trend.
The next factor to look at is the Golden Cross. This is when the 50 Daily crosses over the 200 Daily. This demonstrates that the averages have become in line, and the faster-moving average is leading the rise to a new trend. The Golden Cross often marks that an asset is now in a “Bull Market.”
Next, we see the Orange and Yellow EMAs. The Orange is common, being the 300 EMA. That was clearly a level of resistance after Bitcoin crossed the 200 EMA. The rejection from the initial 300 led to a retest of the 200 EMA in which Support was indeed found. The spring from the newly found 200 EMA support led to the test of the next, less common, EMA, the 385. This 385 showed apparent strength and is now the gatekeeper to price advancing.
Traders would have hoped that the 300 was able to hold Support, but that failed, and now the Bulls are looking for a ride on the 50 EMA, post Golden Cross, to spring back up and take over the 385. A move like that would likely flip the 100 EMA (Blue) above the 200 EMA (Green) and, therefore, “reset” the Major EMAs and put them back in harmony for an uptrend.
The second view is the more standard Horizontal Support and Resistance chart. Here we see the downtrend becoming invalidated at the first previous Lower-High, even more so at the next Lower-High before the first. This pushes the locality of the downtrend – on the local side. Where we start the local downtrend is the level of the potential Double Top referenced earlier. The rejection was swift, but if you look carefully, Support was found on the previous Structure Break, which has been flipped to Support. Provided the price doesn’t fall below the “5” on the uptrend, the next logical move for Bitcoin is breaking the Double Top high and flipping that area to Support.
Daily Bitcoin Volume
As mentioned earlier, momentum is local with the Bulls, but the nail in the coffin may be the lack of Volume. Volume has been steadily declining since the beginning of the year – the same time Bitcoin has been charging. Generally speaking, when Volume decreases, there is less confidence in the overall price movements. This means that when the price is going up with weakening Volume, it is more likely the rally will come o a close as there is not much faith that the move is “real.”
Still, one of the most consistent metrics in Crypto is the Bitcoin Dominance Chart. The initial attempt at 44.5%/45% was met with historical resistance almost perfectly. We watched the Dominance drop, but the pullback was less severe than initially anticipated. This mid-term support led to another attempt and breaking into the 45%+ barrier, which failed in its approach. Once again, we are pulling back. The expected reaction here is on the third attempt; if we are to see one, it should be the one that breaks through with force.
What does this mean…? It could mean that we see an explosive move to the upside in Bitcoin, and the rest of the market lags just long enough to adjust the Dominace back to Bitcoin. This could also mean that the Alt Market dies off while Bitcoin consolidates, leaving the stagnant Bitcoin with more Dominance over the falling Alts.
Bitcoin CME Futures
The Bitcoin CME Futures Gap Traders have been very busy lately. Gap after gap is getting created and then swiftly filled. Even the ones that linger on for a few days seem to fill within a week. A single candle on the 15th cleared multiple gaps without hesitation. We are left with a traditional Weekly gap at the moment. Futures would be looking to reduce the price to fill that gap before any further upside is attempted. We do have a lot of gaps left over, both high-side gaps and low-side gaps.
The chart shows a Regression Trend span over the last five weeks. These are good tools to understand the weight that a trading cluster is either above or below what could be considered the average price action. The white line at $23,745 represents a Daily level that saw repeated failures after the initial second Structure Break. That brings attention to this level to see if, when tested, it would hold as Support. It did not; instead, it failed and may now act as Resistance again. This builds a new pattern we haven’t discussed since the $69K ATH – the Head and Shoulders Pattern.
These patterns lend their name to a human’s Head resting between their shoulders. The Head is clearly higher, but the Shoulder on the Left and the Right are nearly identical. Generally speaking, this would have another few weeks to really paint a solid Right Shoulder, and because of that, we won’t spend much more time on this. However, even an ugly H&S is still a relevant H&S.
That brings us to the challenges that remain ahead. What will the Bulls and Bears do in the next two days? Who will win the Battle for February on the Monthly chart? Who will bring Volume back into the picture and ride the wave? Will the Double Top and the Weekly Tweezer Top outweigh any local uptrend and the momentum it brings? All great questions. Ultimately, most traders will short every advance at the beginning of an uptrend because that is what they have been conditioned to do after longing every dip for the last year and losing. That does not mean you throw the chart in the trash.
At present, there are more reasons to look for an advance, and therefore an uptrend, than a continuation of the more significant downtrend. However, this is not to say the uptrend doesn’t come without real challenges and struggles. The killer for the uptrend is the lack of real Volume. Weak trends rarely last, but weak initial trends are generally forgiven as very few traders actually trade early in an uptrend, as most are far too scared to come off the sidelines.
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