Signs show that Bitcoin may be poised for a rally early next year
A recent CoinDesk article suggests that the technical signs now may point to a coming bullish uptick early in 2019.
Since it was first listed in exchanges in July of 2010 BTC’s price has risen a humongous 150,000 percent. Since then there have been multiple bull runs but also bear runs as well. One bear run took up much of 2014 and 2015. More media attention was placed on Bitcoin as the years passed.
On some occasions the BTC price movement has been counter-intuitive from what one would expect from technical analysis.
Consider for example the descending triangle pattern which is usually bearish in nature though it does contain the prospect for breaking either way. However, there have been repeated failed bearish descending triangle breakdowns during Bitcoin’s price history. Could analysts sometimes be viewing these patterns the wrong way? If they are what makes this year different?
The case for bitcoin’s bullish breakout
Bitcoin’s relationship with the 200-day moving average and descending triangle pattern has been significant. The authors of the CoinDesk analysis describe descending triangles as follows: “Descending triangles are measured by connecting a series of lower highs, usually angled at 45 degrees and breaking down left to right thus creating a primary trendline. The secondary baseline connects two or more of the lowest lows in a series to form the horizontal ‘floor’.What you end up with is a descending triangle pattern that demonstrates a gradual loss of confidence in the asset you are looking at.”
Chart analysis
Looking on the weekly chart at the patterns and indicators combined they show a consistent counter action to the traditional bearish norms. Price generally has broken bullish rather than bearish from the formation rather than continually lowering supports as it normally does. One exception was back in 2014 when a short-term bullish rally was followed by a rejection by the 200-day moving average (MA) which held the price under for well over a year.
Bitcoin’s price being under the 200-day MA establshes the market as bearish and this time is no exception. However, looking at history we could see an upside break of the current descending triangle as being in the cards soon. Further, this could start a move above the 200-day MA as a sign of a larger trend reversal.
Based on the earlier bear run of over a year it could be that Bitcoin will turn bulliish early next year, especially when fundamentals are taken into account as mentioned in a tweet by cryptotrader Ran Nuener: “Last year,around this time,BTC went from $6691 (Nov 11) to $20000 (Dec 17) in 5 weeks.This on the back of the expectation and launch of a cash settlement BTC futures contract. An ETF is a way bigger deal & requires actual purchase of BTC.2 looming SEC decision deadlines ahead.” It would seem that Nuener expects the rally later ths year.
The daily chart shows that BTC’s price has fallen below the 200-day MA meaning officially the market is bearish. The bearish trend with a previous bearish price pattern should indicate further drops in the price but Bitcoin tends to often go counter to this view.
If the price does turn down there is resistance and support at the $4,900 to $5,400 that could again offer support to the falling price.
If the price does break up the first lower high the price needs to find acceptance above is $6,850 and the next is close to $7,400.
The CoinDesk outlook
Based on their analysis the authors view is: “Bitcoin has ignored the bearish implications of the descending triangle in the past, so there is merit in considering a bullish resolution. Beginning in 2012, prices dropped below the 200-DMA (including 2018) twice. The prior bear market lasted 1.2 years, leaving some to speculate a possible ending in sight for the current retracement in price from the all-time-highs seen late last year. A weekly close below the triangle would likely provide confirmation to bearish continuation and set the stage for a prolonged bear market. Only finding acceptance above the 200 DMA and the descending triangle would revive bullish market settings.”
Present situation
It is a bit early to see any signs of a rally. We do see support so far between the $4,900 and $5,400 price range. Trading was sideways today with the close at $6,531 slightly above the open. It is now October 17 UCT. At just over an hour into the new day the price was $6,535 so the price is still staying within a narrow range and trading mostly sideways. The present price of BTC can be found here.
