Bitcoin Technical Analysis 23 June 2021
Bitcoin dropped out of the range and got as low as $28,600 yesterday. Since then it has had a strong bounce. Is this bounce the start of a larger upside move from the bulls, or is this just a quick relief rally before the bearish onslaught continues?
There are some very interesting things going on in the bitcoin chart right now. On that note, let’s dive in.
Bitcoin 1-day chart:
The above chart is a lot simpler than the usual charts that you will see on this website. It has no indicators or moving averages. Instead, it shows a simple head and shoulders pattern that has been forming for some time.
We can see above how, when we initially broke this pattern, bitcoin went down rather rapidly. However, there was large buying pressure here, with enough liquidity for big players to get in. The price subsequently rallied from below $29,000 to about $34,000.
Now, let’s analyze this further with a more ‘complicated’ chart…
Bitcoin 1-day chart with indicators and moving averages:
There is plenty of opportunity for short-term traders right now. But we will continue to focus on the 1-day chart to cut out the short-term noise.
Looking at the above chart, bitcoin has 3 things going for it if you are bullish:
- The potential for 3 drives of bullish divergence on the RSI. We can see that the RSI has put in slightly higher lows while the price has put in lower lows. With that said, we have not yet confirmed that the daily chart has put in a lower low. To confirm this, we would need to close above the high of the last red daily candle. This would be at a price of about $36,000 depending on which exchange you use. This is still some way off from the current price! However, we would have bullish divergence confirmed on the 12-hour chart if we close above about $33,500 at 1 PM London time today.
- The MACD is losing downside momentum. This suggests that the selling momentum is easing.
- Hammer green candle at the bottom Bollinger band. This also closed with lots of buy volume. Often, this is a sign of a major bottom (at least for a swing low to swing high trade).
If you are bearish and looking for more downside, these 3 things are still strongly in your favour:
- Bitcoin is back in a daily downtrend. It will inevitably make a lower low on the daily chart. This lower low can be at yesterday’s close (~$31,500) or it can be lower down. This will depend on whether we confirm the current bottom as a lower low. Either way, we will have a lower low on the daily chart, which is a sign that we are in a downtrend.
- Bitcoin is still closing below the 21-day exponential moving average (yellow line on the chart). For us to get more bullish, it would be good for bitcoin to break through the yellow line and then close a daily candle above it.
- The width of the Bollinger bands are expanding while the price has come down. When Bollinger bands expand, this is often a signal that a larger move is in progress. We can see how the bands were “pinching” (tightening) over the last month while we were stuck in the $30,000 to $40,000 range. This suggests that if we are to come down from here, we could be in for a large move.
Some have suggested that yesterday’s low was the bullish “spring” in a Wyckoff accumulation pattern. However, we would need to confirm that we have a low in place for this to be the case. As outlined above, we would need to close a daily candle above about $36,000 for that to happen.
Interestingly, $36,000 would also be around the 21-day EMA. It would also be the same level that would confirm bullish divergence on the 1-day chart (as a confirmed lower low is needed for this to happen).
With the above in mind, we can start to see the longer-term bullish case if (and only if) we start closing daily candles above about $36,000. That’s step 1 for the bulls.
To confirm that yesterday was “the bottom”, we also need to now make a higher high on the daily chart. To do this, bitcoin needs to close above the last daily high of about $40,500.
This is definitely possible from here, but let’s not get ahead of ourselves just yet.
On the flip side, if we take out today’s opening price of around $32,500, then the bears are still in full control.
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 predicatble. My opinion can and will change depending on what the chart does next.