Bitcoin has been relentless, gaining for six consecutive weeks is a milestone that no other asset class accomplished during the same period. The question is, can bitcoin continue gaining, or are we poised for a correction before continuing the journey to 20k?
Big Picture
- Bitcoin closes its 6th consecutive week in the green, gaining over +3%.
- Volatility is taking a breather as volume decreases.
- Bitcoin is expected to move around $656/day.
- Bullish trend remains in play, but momentum begins to cave.
Key Price Levels
Weekly Key Price Levels
- Support: $15,888
- Resistance: $16,491
Monthly Key Price Levels
- Support: $13,901
- Resistance: $17,068
The Clock is Ticking, but Bulls are Strong
The long-term bullish case has been settled, there is little doubt that bitcoin has what it takes to hit the all-time high soon. But, can bitcoin continue gaining forever? Not really, after a big rally bitcoin becomes overbought and a correction to a support level is due. Is this the case for the upcoming week?
The volume begins to decrease as the price of bitcoin remains above 16k and the risk of a correction increases. Bitcoin’s bullish trend is caving, at least in the short run, because buying pressure is less intense. Notice how the On-Balance-Volume marks a lower high, signaling a bearish divergence and a weakening bullish trend.
Hypothesis 1: Bullish trend is getting weaker
When volume decreases, the price tends to consolidate. Interestingly enough, bitcoin’s volatility begins to decrease but remains at high levels (bitcoin is expected to move around $656/day). Therefore, consolidation is expected, but the engine is on, so be wary of a big move.
Hypothesis 2: Bitcoin consolidates between $15,888 and $16,491
What’s Next?
Decreasing volatility at relatively high levels may be a sign of consolidation, but can also indicate that bitcoin can continue gaining with a decreasing risk of a sharp correction. It’s important to remember that bitcoin will follow the market sentiment. Thus, if bitcoin’s RSI remains above 70 or within the overextended zone, the price can continue gaining. On the contrary, the momentum indicator signals that bitcoin has become overbought. If the king remains above EMA8 it means that bullish momentum remains in play and consolidation is not expected.
It’s somewhat premature to infer that bitcoin is going to consolidate. For starters, if bitcoin continues to hit higher highs coupled with lower highs in the On-Balance-Volume, a head and shoulders formation can tumble bitcoin back to $13,901. On the other hand, if the king remains above $15,888 the price will continue to push upward as a buy wall is formed around the 16k level.
Considering that bitcoin is bullish in the long run, it’s never too late to buy. However, it’s better if you chose an adequate entry point. If you do so, you mitigate the risk of buying too early or too late. Below you can find a strategy for a potential entry point.
Trading Strategies
The best way to trade long-term bull runs is by carefully selecting entry points. 16k may be a daunting price level to buy, but if bitcoin dips and holds above $15,888, set a buy limit order at $15,981 and stop-loss at $15,683. Set your profit target at $16,491, but feel free to liquidate your position whenever.
For those who crave risk, there might be a more interesting play, shorting bitcoin. If you would like to see more aggressive trades, comment below. There is a higher risk with an aggressive strategy, but the returns are higher.
