It’s been an ugly week in cryptocurrencies as even some of the biggest investors suffered jaw-dropping losses. At the end of April, several experts were looking for Bitcoin
In my April 29and article “Key Bitcoin Levels to Watch” I wanted to explain how technical analysis can be used to determine the trend of cryptocurrencies. Of course, risk management is essential for both investors and traders. From the charts, one can identify the price levels which, if broken, will indicate a change in trend.
My analysis of the weekly chart indicated that the failure to rally to the yearly pivot at $48,259 at the end of March, point 1, was a sign of weakness. Prices must be above the annual pivot to indicate a positive annual trend. A drop below the support at the c line would indicate that the rally from the January low was over and the downtrend has resumed.
Last week’s close at $34,033 was below this support, indicating that Bitcoin was likely to drop to $28,908 and $29,320 if not yearly pivot support (S1) at $27,540. Last week’s low was $25.853, which was below the S1 yearly support at $27.540.
The weekly MACD-His had formed lower highs in 2021, f-line, which indicated a loss of upside momentum. It only barely turned positive when Bitcoin hit the yearly pivot level and then turned negative again. It has fallen sharply this week, in line with the negative weekly trend.
Bitcoin’s daily chart shows that it formed a trading range, lines a and b, from the January lows. This happened after the sharp decline from the November high at $68,978. In technical analysis, this is called a continuation pattern or a break in the previous trend. The completion of the trading range on May 5andpoint c, on the increase in volume was a sign that the downtrend had resumed.
High volume as Bitcoin declined confirmed the price action, but as prices tried to stabilize on Friday May 13and the volume was quite low. The MACD-His had formed lower highs since February, line e, which was a sign of diminishing positive price momentum. MACD-His turned negative on April 5and, point f, when Bitcoin closed at $45,501. The MACD-His formed lower lows last week and is not showing any sign of bottoming yet.
While most technical analysts avoid using absolute terms like always or never in their analysis, my decades of studying the price behavior of all asset classes makes it highly unlikely that last week’s lows will occur. are holding up, although some are already looking for a dip. The fact that the trading range (lines a and b) formed over three months would generally predict a decline of at least six to ten weeks.
The severity of last week’s losses and Terra (LUNA)’s 99% drop to near zero suggest that any rebound may be short-lived. From a technical standpoint, we could see a bounce off the initial resistance in the $31,500-$32,500 area. The falling 20-day EMA closed Friday at $34,264, which is just above the 38.2% Fibonacci resistance at $34,141.
Trading between $28,000 and Thursday’s high at $39,964 for a few days is possible before another wave of selling. ether analysis