Technical Analysis of Bitcoin December 2018

Technical Analysis of Bitcoin December 2018

Introduction

As the year slowly winds down to a close, huge dumping of Bitcoins by HODLERs is becoming more glaring as the time series charts reflect these activities. Some private investors are becoming risk-averse while speculators and traders who understand the long-term bearish sentiment are taking opposite short selling trade, thereby causing the price of Bitcoin to plummet. Read on as we analyze the technical price patterns responsible for the price drop.

Are you looking for more technical analysis? See our technical analysis blog for all our technical analysis.

Monthly Chart of the BTC/USD

Last month’s analysis, we identified a double accumulation pattern from the monthly chart perspective. As a result of this pattern, the BTCUSD price has dropped by 46.4%  and we still project a total of 70.65%, offering a low-risk high reward short selling trade. With the year slowly coming to a close, the monthly time frame still maintains a bearish sentiment, and there is still room for further shorting, although we will suggest locking in some profits at this point.

Weekly Chart of the BTC/USD

On October 1, the weekly chart of the BTCUSD triggered a bearish accumulation pattern, with a strong resistance level at 6659.53. Moving forward into the next month of November, price again triggered a double bearish accumulation pattern on the 5th of November, leading to a 47.53% drop in the price of Bitcoin. The accumulation patterns formed on this time frame coincides with that formed on the monthly chart, which further highlights the bearish pressure. Notice the bearish hidden divergence pattern which was confirmed by the double bearish accumulation demonstrating a continuation of the price decline started in January 2018.

The closing price of the previous week 26 November, got price forming a bullish closing inside-bar after the BTCUSD plummet from a bearish accumulation pattern as illustrated on the weekly Bitcoin chart. The bullish closing inside bar is considered a weak campaign fora bullish rally. A bearish price close below the support of the inside bar should ignite a continuation of the bearish trend. However, a confluence of events on a lower time frame, say daily chart, may be necessary for a highly probable short sell trade.

 Daily Chart of the BTC/USD

The daily chart of the BTCUSD also has its fair share of bearish accumulation patterns as well as a breakdown of bullish accumulation pattern. From November 14, an increasing selling pressure led to a breakdown of bullish accumulation.  Following this breakdown pattern was a series of bearish accumulation patterns, with the last one formed on November 17, thereby establishing a resistance level at 5752.86. This consequently caused price to nosedive further by 36.8%.

On the last day of the month, another breakdown of bullish accumulation took place, sending price lower by 17.5%. Meanwhile, a bullish regular divergence pattern is anticipated in the moment, of which a breakout of the bullish inside bar shown above should give confirmation to the pattern.

4-HR Chart of the BTC/USD

If you are a short-term trader and would rather take positions off a lower time frame, then I would suggest the 4hour chart, as the price patterns are quite reliable and do not have much waiting time.

A breakdown of bullish accumulation was triggered on the November 30 similar to the daily chart. As a result of it being a long bearish candle, the price recoil was no surprise. The first day of the month of December closed by a breakdown of bullish accumulation and further moved into a double bearish accumulation pattern. These patterns forced the price to dip by 17.7% south.

Towards the end of this bearish move, price enters into a bullish thrusting outside bar, which later encapsulates a double bullish accumulation pattern on the December 9. This we consider a short-term correction of the bearish decline which could later fuel up for more bearish setups. Only time will tell.

Conclusion

The bullish divergence pattern may be the beginning of a long-term bullish trend, but a confirmation from the weekly or monthly time frame would lend more confidence to this. We could also expect to see a retracement of the current bearish trend and enter a short position on a bearish signal from the 4hour and daily time frames.

Read the next Bitcoin (BTCUSD) Technical Analysis from January 2019 here.

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