CoinDesk analysis
Omkar Godbole has his customary analysis on CoinDesk. He notes that Bitcoin is declining as bullish bets are unwinding and in doing so are creating downward pressure on the price. Godbole’s article was last updated at 13:10 UTC. At the time, BTC was trading at $3,780 on Bitstamp a decline of 5 percent over 24 hours even though it was at one time above $4,000.
Long positions on Bitcoin fell to an eight-day low of 31,237 early today. At press time they were down 8 percent at 31,255, the largest single day decline since December 19. The bulls are not buying. Also, the long-short ratio has pulled back from a five-month high yesterday back to 1.35.
The declining longs comes after there have been repeated failures to rise above the key $4,100 resistance level. The bulls are probably demoralized and exiting the market for now.
Chart analysis
The daily chart shows a bearish doji reversal, that is back-to-back doji candles and a negative follow through. This indicates that the recovery rally from the December low of $3,122 has stalled. The bears are regaining some control. This is confirmed by the fact that the trendline connecting the December 28 low and the January 6 low has broken down. The 14-day relative strength index (RSI) is also moving in a bearish direction.
The failure of the bulls to force an inverse head-and-shoulder breakout could also be a strong bearish signal, especially since the bull flag breakout seen earlier in the week has opened the way for a breakout over $4,300. But it was never achieved. BTC could now fall to the major support of $3,566 the December 7th low.
The four-hour chart shows prices trading well below $3,934 invalidating the bullish view indicated by the bull flag breakout seen earlier this week on the 4-hour chart.
Godbole’s view
Based on his technical analysis Godbole believes: “The bearish doji reversal seen in the daily chart indicates an end of the recovery rally and has likely opened the doors to the bullish-higher low of $3,566 (Dec. 27 low). A break below that level would further strengthen the bear grip and allow a re-test of the December low of $3,122. The confluence of the inverse head-and-shoulders neckline and the 50-day EMA, currently at $4,120, is the level to beat for the bulls. A high-volume break above that level would open up upside towards $5,000. ”
Present situation
24 hours ago BTC was trading at $4,008 according to CoinDesk data. It has gone as high as $4,025. However, it has since dropped as low as $3,570. It did not quite reach the level mentioned by Godbole, $3,566. At 17:45 Central Standard Time Bitcoin was trading at $3,628 somewhat above its low. Over the 24 hours, BTC has dropped $380 or 9.5 percent. It remains to be seen if BTC has bottomed again for now or if it will break through the $3,566 level. The present price of Bitcoin can be found here.
