Bitcoin Price Action Update

Written by Edward Gonzales

November 27, 2021

It would appear as though Bitcoin faced some rejection after recent bearish divergence was observed. Bitcoin has been on a downtrend for 17 days at the time of this writing. The most recent downtrend prior to the most recent uptrend lasted a total of 21 days. There is a large wedge outlined by high and low points in Bitcoin’s price action. Let’s take a look into some different time frames to see what we can analyze.

Daily Time Frame

Based on the information in the daily time frame chart above, we can see that there is still a downtrend supported by technical indicators. Price is sitting right in the middle of the orange “Possible area of support”. Daily candlesticks have recently used the 26 EMA as resistance which threw the price down to the $54,000 range. $52,725 would be the lower band of indicated support zone. This area is supported by previous resistance and a previously respected ascending trend line. A touch in this area can not be ruled out. 

In this area will be amongst the best opportunities, however these opportunities will carry a greater risk as they are pre-breakout. Soon we will see a price conflict as price can not respect both the previous uptrend line and the current downtrend line – one must be broken. After this break will come a retest – if that retreat fails it is likely to see price go the opposite direction of breakout. After the retest is confirmed or rejected will be the safest entry, but less profits can be secured on this delayed entry.

4 Hour Time Frame

Looking into the 4 hour time frame, we can see that price is relatively far from the 9 EMA and all other EMA’s indicating that price can not fall much further without some type of rebound. With this being said, it is still possible to see a price range between lows of $51,600-$52,750. After this ranging we could see something like the green path projection or the red path projection. 

These are just two possible trajectories. Most of our technicals support the idea of a downtrend. Our 50 EMA (blue) has crossed the 200 EMA (orange) here, which is known as a “death cross” and is generally indicative of downward price action. The RSI tells us that the asset is quite oversold currently, but not extremely oversold. There is technically bullish divergence formed by the RSI and price action. This is because the RSI’s recent low point was higher than the last low point, while in the candlesticks the most recent low is lower than the previous low. This would indicate a time to start buying or dollar cost averaging a long position. The MACD and ADX support a valid downtrend, which is contrary to the information displayed by our RSI divergence. Divergence is usually a trend reversal signal, but false divergence can get a trader in a bad spot. Upon a breakout the retest is what should be considered. 

1 Hour Time Frame

Zooming in just a bit further to the 1 hour time frame we can see that our technicals are not giving us much breathing room. The divergence displayed by the 4h chart would seem played out and no other divergence could be spotted. Price is sitting very pretty in our projected support zone waiting to catch up with the EMA’s (which on this timeframe all support a valid downtrend.) If the 9 EMA is used as rejection here we can expect to ride it downward as a sort of dynamic resistance until it is pierced and support is found above it.

Our RSI tells us that this asset is certainly oversold on this timeframe. The MACD shows the potential for a bullish cross as it is exhausted but at the time of this writing there is no cross observed. Our ADX is showing us that the trend has gained momentum but could potentially reverse soon as it is approaching high levels.

We are in an area of price conflict where one trend will be respected and one will be broken. Pay close attention to the wedge lines indicated for the possibility of an outbreak. To learn how to analyze markets using technical analysis, visit our website homepage to view our latest and greatest course discounts. 

By viewing any material or using the information within this publication you understand that this is general education material and you can not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here. Trading cryptocurrency has potential rewards, but also potential risks. You must be aware of the risks and be willing to accept them in order to invest in the markets. Only trade with funds you can afford to lose. This publication is neither a solicitation nor an offer to buy/sell cryptocurrency or other financial assets. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative of future results.

Written by Edward Gonzales © Crypto University 2021

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