Bitcoin Price Analysis: Bull Trap? (Week of October 19)
Bitcoin Price Analysis from Cointelegraph by George Samman (Week of October 19)
Last week’s article stated:
“So far this has been a self fulfilling prophecy of bullishness as price has lifted with both volume and the OBV. The major problem however, is that while price has risen it has been rather modest on what is much higher than average volume for bitcoin compared to normal levels.
At the same time the RSI is bullish, but reaching toward an oversold level, which it will certainly hit if we test resistance at US$255-$260 very soon. This will probably lead to a rejection of this area, and if this happens it will be time to determine if it’s a consolidation before a move higher or a bigger downside move.
The Bollinger Bands remain tight so one should expect price movement and some volatility to come back into the price. Obviously breaking through resistance would be bullish and could lead to a test of the US$300 area. As has been stated before: volume does precede price and the Bollinger Bands are confirming this. Expect a sharp move soon.”
Well the sharp move came, and instead of rejecting resistance the price shot sharply above it to a high of around US$273. The RSI did get overbought and price sharply snapped back. It is now consolidating above the 200 day EMA, which it broke above in the latest rally.
OBV continues to remain at elevated levels (see chart below), in fact it hasn’t been this high since October of 2014 when price was above US$440. A lot of this volume still appears to be wash trading, however as volume has picked up so has the price. The big problem here is that price is not reflecting this massive increase in volume as it has risen a mere US$30.
The 50 and 100 day EMA’s have attempted a bullish crossover and thus far have been rejected. Then, after the recent price high of US$273 the next day’s price action formed a Bearish Engulfing Pattern, which generally leads to top in price. Thus far price has been consolidating above the 200 day EMA (US$256), however after that bearish engulfing pattern its prudent to be cautious here. Not to mention the RSI remains near overbought levels even after the price drop. The MACD remains on a buy signal as well, but has not elevated like the other indicators. Also, Buying Pressure remains high here.
Again with all these indicators at such high levels it’s surprising the price hasn’t moved further. This is why there is the possibility of a Bull Trap forming in this this whole move.
If price gets back above US$270 and takes out US$273, a run for the US$290-$300 area is the next target. This is major resistance and as has been stated many times: if price fails to break this area, expect major downside. It’s also possible that US$300 gets taken out and overshoots to the US$320-$330 level. This is a target that has to be taken out for a true bull run to start, which the price hasn’t yet been able to reach..
On the downside, if price drops below US$256 ( the 200 day EMA) look for support at US$247 and US$240.