Analytics provided by BBA

Despite a relatively slow market over the past few weeks due to the “summer doldrums,” it now appears as though volatility is making a slow return on both the upside and the downside.  With that in mind, the technicals remain key in this environment.

Last week when we returned from the Labor Day holiday in the US, the Bitcoin markets decided to take a jaunt to the upside to test what has been heavy resistance in the $630 area for over a month.  Despite staying elevated for the better part of the week, this weekend brought a round of technical selling which took the price from the mid-$620’s down below $600 once again.  That being said, the selloff was quickly bought up and the price recovered to the $605 area where it now sits, although we do not think it will stay stagnant here for long considering we are now in a seasonal period which favors a sustained increase in price action and volatility.

Prior to getting started on the daily chart below, however, we first want to comment on the longer term prospects for Bitcoin in order to put the shorter term analysis in context.  We still think that an upside resolution out of the $450 – $700 range will materialize before the end of the year, although we cannot rule out another pullback into support prior to that move.  Given that we think this remains a bullish consolidation period within a broader bull market, we would continue to be longer term buyers of the said dips, although we do expect them to be short-lived.  So, with that in mind let’s move on to the daily chart for our weekly technical analysis.

We can see that the price remains in an unorthodox symmetrical triangle formation, the top of which we had just finished tagging sans breakout.  Also notice that the 200-day SMA was, and is, acting as resistance, as is the 50% Fibonacci retracement level, and the price is now settling into a volume profile PoC (Point of Control) which could use some filling in.  Conversely, the price was barely able to reach the top of the demand area/support zone on the spike lower from yesterday which tells us that there are some buyers down at these levels, especially considering that the A/D line is still trending higher.

As far as momentum goes, we can see that Willy remains stretched to the upside as it enters officially overbought territory while RSI and MACD test their respective centerlines. Not only that but the near-term EMA’s are now undeniably bullish, although it does look like the current compression will continue for the time being.  Finally, the market structure is still rather bearish, although that could change quickly as the triangle consolidation comes closer to an end.

Bitcoin price chart

Generally speaking, we want to continue to accumulate positions for a potential longer-term breakout from this technical pattern. However, given what are now fairly overbought conditions in a strong resistance area we think it might be wise to wait to see if we can test the support at the bottom of the formation prior to backing up the truck.  

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