Bitcoin Weekly Update 01-12-2020

Updated: Feb 22

Bear trend breakout or critical rejection?


Last week I commented that bullish signs were starting to emerge on the lower time frames, and sure enough they played out, with Bitcoin rallying to nearly $8,500. Some argue it was due to the Iran news and price will proceed to bleed out like it did after the Xi pump, others than BTC has broken out of the bear market. Which is it? Truth is, it's a bit of a conflicting story.


Bitcoin Weekly

Here we have the Bitmex weekly Bitcoin chart and although last week's candle is impressive, overall this looks like a horrendous area to long as we're right at the critical weekly level, the weekly downtrend and the 20-week moving average while volume maintains a downtrend; at this point it would clearly be longing resistance and a potential bearish retest. But there's a different story on spot exchanges.

On the Binance weekly Bitcoin chart, price is still below the key weekly level and the 20-week moving average, but price has clearly closed above the downtrend level and volume looks strong.


So has price broken out or are we possibly setting up for a major rejection? Let's see if the Daily makes things any clearer.


Bitcoin Daily Chart

Again, let's start with the Bitmex daily Bitcoin chart. Price broke through and re-tested support from $7,700-7,900 and has closed above both the 50 and 100 daily moving averages which are starting to curve up. Furthermore, price broke the long term OBV downtrend although it is struggling to close above the horizontal OBV level so not yet a clear breakout. Looking at the channel formed on the daily, Bitcoin would have to convincingly break $8,800 in order to close on the outside, which coupled with the weekly resistance level right overhead and the 200-day moving average seems like a tough task. What about spot exchanges?

Here is the same daily Bitcoin chart, but on Binance and you'll quickly notice a dramatic difference as here Bitcoin actually appears to have closed outside of the inner channel, suggesting a possible bear market breakout. Interestingly, despite the strong volume OBV has not managed to break the long term downtrend or horizontal level.


Summary


So what is it, a bear market breakout or a rejection from a key weekly level? During times with conflicting signals, I like to do a bias check to get a clearer view - a great way to do this is to use an inverted chart.

Here is the Binance weekly inverted Bitcoin chart. The clearest thing here is the rising wedge which is right on the verge of breaking down; support is holding for now but there's clear resistance overhead. This overall paints a bearish picture, which on the inverse chart means I'm favoring bullish scenarios over bearish ones. However, $6,000 also looks like clear untapped liquidity and support has not yet given out so I'm not throwing the bearish argument to the gutter, especially because getting bullish right at the level price would logically reject is the worst place to switch bias.


So am I just saying price could go up or down? Well, yes. However, price can always go up or down. What's critical here is that until the weekly closes above $8,500 there is still a chance of significant rejection and heading towards that untapped liquidity pool. However, buyers have stepped in and unless that $7,700 weekly level we just cleared is lost there's really no reason to be overtly bearish, not with the halving only a few months away.


In conclusion, as long as $7,700 holds on a weekly basis I'm favoring the bullish argument and have scaled into long positions around $8,000. We are right at weekly resistance though so the conservative play is to wait for a close above $8,500 on a weekly level. Lose $7,700 and I'll be strongly favoring bearish scenarios.


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