Bitcoin Technical Analysis 05 July 2020
The bitcoin price showed signs of recovery over the 4th of July holiday weekend. But it has now given back some of those gains, with the price currently finding support at the $34,000 level.
The volatility of bitcoin on the daily time frame has decreased, along with overall trading volume. This suggests that bitcoin is preparing for a major move.
At this point, it is difficult to determine the direction in which this move will take place as there are conflicting indicators in the chart. However, there are some clear conditions we can lay out to help us potentially get on the ride side of the move.
On that note, let’s start with the 1-day chart:
Bitcoin 1-day chart:
Bitcoin 1-day chart. Taken at 10.12 AM London time.
Yesterday bitcoin closed a daily candle just above the 21-day EMA line (yellow line). As discussed in last week’s analysis, this is a condition we wanted to see for further upside continuation on this time frame. With that said, bitcoin is currently below this line again. It needs to get back above it to signal further upside.
We can also see that the 21-day yellow EMA (exponential moving average) is getting closer to the 50-day SMA (simple moving average). An upside “bullish cross” of this would lay the groundwork for a move towards higher levels.
The Bollinger Bands have also contracted since last week. As has bitcoin’s trading volume. The MACD histogram is also contracting. Putting this all together, we have declining volatility and declining volume. This suggests a major move is looming.
If bitcoin can get back above the previous daily high (~$36,000), it would also be above the 21-day EMA. The bullish cross of the 21-day EMA and the 50-day MA would then become likely. This would imply that bitcoin’s major move is up rather than down.
The first target for this would be towards the top of the range ($40,000 to $42,000). We can re-assess if bitcoin gets there.
On the downside, if bitcoin closes a daily candle below the last low ($33,000), a retest of the range lows around $29,000 to $31,000 becomes likely in my opinion. We can re-assess if bitcoin gets there.
Bitcoin 1-hour chart:
We can zoom in to the shorter-term time frames to get more insight into the next major move. The shorter-term time frame conditions are not as reliable as the daily conditions. However, they do have the potential to get moves earlier.
Bitcoin 1-hour chart. Taken at 09.10 AM London time.
On the 1-hour chart, we can see that bitcoin is currently holding support at the 0.618 Fibonacci retracement (~$34,000) of the last swing high move. This price level also coincides with a retest of the original breakout area from the weekend. A bounce at this support would be completely normal in a bullish move.
An hourly closure above about $36,000 would look very good for the bulls and suggest a move higher towards the top of the major range ($40,000 to $42,000).
If the 0.618 Fib does not hold, bitcoin is likely headed towards the 0.786 Fib (~$33,400). If that does not hold, the bottom of the range ($31,000 to $29,000) is more likely.
Conclusion:
Bitcoin trading volume and volatility have both trended lower recently. In other words, bitcoin is boring right now.
It won’t stay boring for long, so now is the time to be paying attention to the chart.
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Disclaimer: This is not investment advice, it is just my opinion on the bitcoin chart right now. I can and will be wrong because markets are not predictable. My opinion can and will change depending on what the chart does next.
