Figure 3: BTC-USD, 1-Week Candles, Bitfinex, Macro Bullish Exhaustion
Two very clear indicators of bullish momentum reduction lie on the RSI and the MACD. Strong highs have been pushed to by bitcoin’s price but it’s left the momentum signs weakening.
At the time of this article, the most recent rally has failed to create a new high in the low $4400s. A breakdown of the wedge could lead to a significant price drop of approximately $500. The price target would be around $3700.
Over the past week, the BTC-USD market has seen some major price swings. The cost reached $4500 to see it pull back down to the low $4100s. And now, within two days, the price has topped back out in the low $4400s. There has been some major chop and apparently erratic dumps and price hikes, but overall there seems to be a common up trent in the macro market movements:
As stated earlier, the rising wedge is paired with decreasing volume that’s a clear giveaway that up momentum is waning. To complement this fatigue, the RSI and MACD are showing signs of divergence in the current market and are demonstrating a lack of this momentum necessary to sustain a bull market.
Although rising wedges are bearish in nature, that doesn’t mean new highs aren’t in store for bitcoin. There’s still some strength in the market, although the macro trend is showing a movement that is bearish. The sector is now trending over 200 EMA which, by many standards, is representative of a bullish market that is trending and the 50 EMA. Though the price is trending up and the overall EMA signals are showing potential upward continuation, there are pretty clear signs of bullish fatigue on the macro scale:
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It’s not tough to argue that bitcoin has seen heavy price growth and requires a little room to breath. It is entirely possible the market will not see any pullback that is strong and it might go. However, in case a market that is sustained pulls down the price, we can expect to find support along the midline of the Bollinger Bands at the low $3000s. It’s important that the chart and market implications of the macro divergence are occurring . So, while this doesn’t mean the market will suddenly plummet, it is important to understand that a significant price drop could be in bitcoin’s future.
Published at Fri, 06 Oct 2017 21:58:30 +0000
Coupled with this price growth is a tendency of decreasing volume throughout the period of the wedge. A wedge is a trend that shows weakening pressure as each rally becomes smaller and smaller. There are rallies which bring the price to new highs, but rally on smaller and smaller quantity as the price corrects.
When the rising wedge breaks into the bottom, we can expect the support amounts to lie on the Fibonacci Retracement values displayed above. The price goal of the rising wedge would have BTC-USD analyzing the 50% retracement values.
A breakout of the wedge could have its price target at the $3700s.
Even though I gave lots of bearish arguments, it should be noted that these predictions are on a macro scale, and the instant trend is showing strong support along the 50 and 200 EMAs. Until proven otherwise, the market is bullish.
Since the base of the bear run last month, bitcoin has seen several rallies which have continued along a generally positive trend. The figure above shows a tendency of higher highs, higher lows and an upper/lower border that is converging. This type of price activity is called a rising wedge.
Figure 2: BTC-USD, 4-Hour Candles, Bitfinex, Bullish Exhaustion