An article posted on Coindesk by Omkar Godbole at 11:47 UTC yesterday March 4 uses the money flow index in his analysis.
The money flow index (MFI)
The money flow index (MFI) also called the volume-weighted relative strength index is used by analysts to identify buying and selling pressure. The index ranges between 0 and 100. A rising MFI shows an increase in buying pressure while a falling MFI indicates the opposite, increasing selling pressures. The index validates or confirms price trends although it sometimes does not follow a prevailing market trend.
Bitcoin wrecked hopes of a long-term bullish reversal back on November 14 as it plunged below $6,000 and hit a 15-month law back on December 14. At the same time the MFI went down from 43 in the middle of November. However, it ended up with a higher low at 22.00 which contradicted the lower low in the price of BTC. This divergence is widely viewed as an early warning of a bearish-to-bullish trend reversal. This early warning appears to be confirmed by the fact that bitcoin actually had a 10 percent gain last month after losing for a six months in a row. The MFI rose in February from 25 to 44.
Other indicators such as the moving average convergence divergence (MACD) plus the bearish crossover of the 50 and 100-week moving average (MA) also are signals of long-term bearish exhaustion. However these tools do not incorporate trading volumes, and hence the MFI is an even better indicator. When the Godbole article went to press bitcoin was trading at $3,785 according to data at Coindesk.
Chart analysis
The weekly chart shows the MFI diverged in a bullish direction in mid-December in spite of the fact that BTC reached lows of close to $3,100. It also reached another higher low of 25 at the end of January and is now rising. A breakout of the MFI would reinforce the bullish divergence the occurred in December 2018.
$4,190 is the level to beat, the high of the inverted bullish hammer carved out last week. This pattern shows that the bulls are now testing the bearish resolve to keep prices low and a sign that the market is bottoming out. If there is a convincing move above $4,190 backed by a rise also in the money flow, there could be a rally as high as the psychological resistance level of $5,000. On the other hand, if the February low of $3,328 is breached with high volumes the bullish case would be weakened.
Present situation
24 hours ago BTC was trading at around $3,698 according to Coindesk data. Since then it has had a low of just $3,683 but a high of $3,866. At 16:40 Central Standard Time bitcoin was trading at $3,826 up over 3.5 percent during the last 24 hours or $128 dollars. It seems that BTC is advancing but still has quite a ways to go before reaching the $4,000 level again let alone testing the old high of $4,190. The present price of bitcoin can be found here.
