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Technical Analysis

Weekly Bitcoin Technical Analysis, November 11th 2019

Photo of Author Chris Colin
November 11, 2019
Chris Colin
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Bitcoin building bullish momentum: A headline article in the Chinese state newspaper, another US Fed rate cut, a short-term falling wedge, and hidden bullish divergence on the daily chart

Bitcoin (BTC/USD) had a surprising acknowledgement on Monday morning, when a headline article was printed on the front page of Xinhua, the official state-run newspaper of the People’s Republic of China, titled ‘Bitcoin: The First Successful Application of Blockchain technology‘.

 

This comes in the wake of Beijing’s accelerated blockchain adoption drive, and although the article does criticize bitcoin, making it very clear that bitcoin is not a tangible currency with sovereign support, a headline article in the state newspaper is expected to spread awareness, and introduce the concept throughout China.

 

This news is seen as surprising and generally bullish for the industry, since China has a history of strongly discouraging the use of cryptocurrencies, imposing a ban on Initial Coin Offerings (ICO) and cryptocurrency exchanges in late 2017, and cracking down on bitcoin mining operations in early 2018.

 

This bullish news is coupled with a decision by the US Federal reserve to cut interest rates by another 0.25% a couple of weeks ago, for the third time this year, bringing the target level to a range of 1.50 – 1.75%.

 

This is a bullish advancement for bitcoin, since bitcoin is considered to be a “risk-on” asset, and it is believed that dropping interest rates equates to liquidity injections into financial markets as funding becomes cheaper. This largely benefits bitcoin when higher liquidity pushes excess money into these so called “risk-on” assets.

 

It’s important to note that the price of bitcoin hasn’t had an immediate reaction just yet, whereas stocks have already gone on to print new all-time highs. Bitcoin has shown a strong correlation with stocks in recent times, so will bitcoin follow suit?

 

 

Short-Term: Bullish Falling Wedge / Ending Diagonal on 4-Hour Chart

 

 

Looking at the 4-hour chart, bitcoin seems to be printing a “Falling Wedge” pattern, also referred to as an “Ending Diagonal” according to Elliot Wave Theory.

This is a bullish pattern which is a narrowing price move composed of 2 converging trendlines which contracts as the price moves lower, and as per the rules of Elliot Wave Theory, this is made up of 5 waves, 3 of which are impulsive and 2 of which are corrective.

 

The ADX/DI indicator (trend strength / trend direction) is reflecting a short-term bearish trend, after experiencing a bearish cross on Sunday morning between -DI (bearish trend direction) and +DI (bullish trend direction) when bitcoin unsuccesfully retested the 50-bar and 100-bar 4-hour simple moving averages (MA50 and MA100) as resistance.

 

Bearish trend strength is currently sitting at a significant 32 level, and price has reached that falling wedge support, although trend strength is gradually declining with each 4-hour candle close, so we’re getting close to potentially putting in a short-term low.

 

Wave (v) of this ending diagonal could potentially find support somewhere close to $8 461 ($11 186 CAD), which is 0.618 Fibonacci retracement level of the surge from $7 293 to $10 350 ($9 642 to $13 684 CAD) at the end of last month.

 

A decent support range could potentially be found between strong horizontal support at $8 430 ($11 145 CAD) and 4-hour MA200 at $8 658 ($11 448 CAD).

 

There should be significant resistance in a range between $9 196 and $9 250 ($12 160 and $12 231 CAD).

 

$9 196 ($12 160 CAD) is where 4-hour MA100 is currently sitting, which is aligned with the previous 0.382 Fibonacci retracement level (inverse 0.618 on the chart) of the surge from $7 293 to $10 350 ($9 642 to $13 684 CAD), and the top of wave (iv) of the ending diagonal. $9 250 ($12 231 CAD) serves as major horizontal resistance.

 

Based on the hidden bullish divergence signal on daily StochRSI, the next major resistance range can potentially be found between $10 000 and $10 272 ($13 223 and $13 583 CAD),  these are 2 levels of major horizontal resistance above the previous 0.886 Fibonacci retracement level of  the surge from $7 293 and $10 350 ($9 642 to $13 684 CAD).

 

 

Mid-Term – Hidden Bullish Divergence on the Daily Chart

 

The long-term outlook remains the same as was covered in last week’s market snapshot, however there have been a few new developments on the daily chart.

 

Bitcoin just found support right at the 50-day simple moving average (MA50), reaching a low of $8 550 ($11 306 CAD) early this morning (EST). This support level is currently aligned with major horizontal support, as well as major trendline resistance-turned-support, after breaking out from, and retesting a large falling wedge, as illustrated on the chart.

 

This bullish price action is also coupled with strong hidden bullish divergence on the daily StochRSI. Hidden bullish divergence can be seen where price is printing a higher low but StochRSI is printing a lower low. This could potentially result in a large impulsive rally, which could potentially spell the end of the corrective phase from the recent $10 350 ($13 684 CAD) peak.

 

Bitcoin experienced a 0.5 – 0.618 Fibonacci retracement of the surge from $7 293 to $10 350 ($9 642 to $13 684 CAD), so if daily MA50 and that large trendline support both continue to hold, BTC could potentially target $12 238 ($16 182 CAD), which is a 1.618 Fibonacci extension of that surge from $7 293 to $10 350 ($9 642 to $13 684 CAD), and the starting point of the resistance trendline for the large wedge on the daily chart ($12 325 / $16 297 CAD) which should act as major horizontal resistance.

 

Bitcoin will also face strong resistance at the 1.382 Fibonacci extension level which is currently sitting at $11 517 ($15 228 CAD), as well as within a resistance range between $11 004 and $11 181 ($14 550 and $14 784 CAD), which is between the 1.214 and 1.272 Fibonacci extension level of the surge from $7 293 to $10 350 ($9 642 to $13 684 CAD).

 

If daily MA50 fails to hold as support and bitcoin heads in the opposite direction, however, there should be a major range of support between $7 087 and $7 231 ($9 370 and $9 561 CAD), which is between the 50-week simple moving average (MA50 currently sitting at around $7 100 / $9 388 CAD) and the 0.618 Fibonacci retracement level ($7 231 / $9 561 CAD) of the entire impulsive move from $3 122 to $13 880 ($4 128 to $18 354 CAD).

 

Alternatively, bitcoin might potentially go on to retest major trendline support in a major horizontal support range between $6 067 to $6 465 ($8 022 to $8 549 CAD).

DISCLAIMER:  The analysis provided in this article is for educational purposes and should not be considered an investment recommendation, All examples and analysis used are for illustration purposes only. All analysis is of the personal opinion of the technical analysis writer.

 


Photo of Author Chris Colin
Chris Colin
Chris is a Crypto Trader / Crony / Degenerate Bitcoin Addict, and Technical Analyst. Chris has a bachelors degree in Economics from Rhodes University. He is a cryptocurrency investor and enthusiast, and has a passion for analyzing the crypto space.
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