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Technical Analysis

Weekly Bitcoin Technical Analysis, November 18th 2019

Photo of Author Chris Colin
November 18, 2019
Chris Colin
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Bullish Developments: Bakkt announces enterprise-grade institutional bitcoin custody, and multiple bullish divergence signals on the higher time frames

 

Last week, there was an announcement from Bakkt, the crypto subsidiary of the Intercontinental Exchange, that ‘Bakkt Warehouse’, their qualified custodian of bitcoin, will begin holding the bitcoin assets of their institutional investors.

 

Previously, the Bakkt Warehouse only served clients trading the Bakkt Bitcoin Futures contracts, but now, having received authorization from the New York Department of Financial Services (NYDFS), they’re able to offer bitcoin custody to all institutions, with clients around the world now having the ability to safeguard their assets using Bakkt’s enterprise-grade offering.

According to Adam White, Bakkt COO, this could be the critical link for institutional adoption:

 

A critical link — perhaps the critical link — in the institutional adoption of bitcoin is custody. When investors have ready access to regulated custodians whose security and processes they trust, the full potential of this emerging asset class and technology can flourish.

 

Bitcoin (BTC/USD) is potentially gearing up for a significant surge in price if the various bullish divergence signals begin to play out on the higher time frames. Currently, there are bullish divergence signals on the 4-hour, 6-hour, 12-hour and daily charts, indicating that there might be trend reversal in our midst, at least over the course of the short-to-mid-term.

 

This is promising, considering that divergence signals are usually more reliable on the higher time frames, especially when layered with divergence signals on each time frame starting from the 4-hour chart.

 

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

 

Looking at the 4-hour chart, bitcoin is fast approaching the apex of a bullish Falling Wedge, also referred to as an Ending Diagonal by ellioticians, where price narrows between 2 converging trendlines in the form of 5 waves, 3 impulsive and 2 corrective, before eventually breaking to the upside as price approaches the wedge apex.

 

Bitcoin has also reached the golden ratio with a 0.618 Fibonacci retracement ($8 461 / $11 181 CAD) of the surge from $7 293 to $10 350 ($9 638 to $13 678 CAD), and the price is currently holding at a major horizontal support range between $8 350 and $8 500 ($11 035 and $11 233 CAD).

 

If this level can hold, and if bitcoin can print a full 4-hour candle close above the 4-hour 200-bar simple moving average (MA200) at  $8 710 ($11 510 CAD), followed by a close above $8 900 ($11 761 CAD) and the 4-hour 100-bar simple moving average (MA100), there could potentially be a significant bullish move approaching over the short-term, which should coincide with a falling wedge break to the upside.

 

There is also strong bullish divergence printing on the 4-hour Money Flow Index (MFI), which is a momentum-based oscillator incorporating both volume and price, as well as on the 4-hour Commodity Channel Index (CCI), which is also a momentum-based oscillator used to identify cyclical trends.

 

These divergence signals are illustrated on the chart where price is printing lower lows, while the oscillators are printing higher lows.

 

Mid-Term – Hidden Bullish Divergence on the Daily Chart

 

There are few conflicting signals on the daily chart, although my bias is leaning towards a bullish breakout over the mid term, as year end approaches.

 

Bitcoin closed below the 50-day simple moving average (MA50) over the weekend, while simultaneously losing a significant level of major support at $8500 ($11 233 CAD), however there are a few bullish signals on the daily chart which could potentially see bitcoin regain those levels as support over the short term.

 

There is a larger falling wedge on the higher time frames with the wedge’s trendline resistance (connecting the peaks from $13 880 / $18 343 CAD) currently being retested and holding as support, after bitcoin managed to break above this level of resistance at the end of October 2019.

 

There is hidden bullish divergence printing on the daily StochRSI (an oscillator that measures the level of RSI relative to its high-low range over a set time period), where price is printing a higher low while StochRSI is printing a lower low. This divergence signal is currently extended in oversold territory, and so could potentially start playing out soon.

 

Commodity Channel Index (CCI) is currently oversold but on the brink of moving above the oversold level. As illustrated by the yellow circles, each time CCI breaks out of the oversold level on the daily chart, bitcoin usually establishes a major low.

 

Volume has also been gradually declining, which is usually an indication of consolidation and indecisiveness before a substantial move. Over this past weekend, BTC/USD experienced the shortest 24-hour volume candle spike since November 2018, just before bitcoin experienced a 50% crash in price.

 

Will bitcoin follow suit and experience another crash in price, or will the substantial mid-term move prove to be impulsive and bullish instead?

A bullish breakout over the short-to-mid-term could see bitcoin retesting a confluence of resistance ranging between $9 770 and $10 000 ($12 912 to $13 216 CAD), before potentially going on to print a higher low within the $8 000 – $8 200 ($10 573 – $10 837 CAD) support range as a deeper 0.618 Fibonacci retracement of the surge from $7 293 to $10 350 ($9 638 to $13 678 CAD).

 

This range of resistance between $9 770 and $10 000 ($12 912 to $13 216 CAD) includes the previous 0.382 Fibonacci retracement level ($9 770 / $12 912 CAD) of the entire move from $3 122 to $13 880 ($4 126 – $18 343 CAD),  the 0.382 Fibonacci retracement level ($9 809 / $12 963 CAD) of the correction from $13 880 to $7 293 ($18 343 to $9 638 CAD), and a 0.786 – 0.886 Fibonacci retracement ($9 695 – $10 001 / $12 813 – $13 217 CAD) of the surge from $7 293 to $10 350 ($9 638 to $13 678 CAD).

 

Long Term – Trend Reversal or Bullish Continuation on the weekly chart?

 

 

According to the weekly ADX/DI indicator (trend strength / trend direction), the bullish trend is still in-tact on the weekly chart, with +DI (bullish trend direction) above -DI (bearish trend direction), however the strength of the bullish trend (ADX) has continued to decline, and is now sitting at the 20 level, which is below the 25 level required in order for the bullish trend strength to be significant. Until ADX is back above 25, there is still a possibility of a trend reversal and a bearish DI cross.

 

The 50-week simple moving average (MA50) is still following an upwards trajectory, and if the recent major low holds as support, there could potentially be a bullish cross between MA50 and MA100, which could spell a continuation of a larger bull run, meaning the correction from $13 880 to $7 293 ($18 343 to $9 638 CAD) would precede the next impulse phase on the weekly chart

 

Over the long-term, this could then result in a 1.214 – 1.272 Fibonacci extension of the entire move from $3 122 to $13 880 ($4 126 – $18 343 CAD), reaching a resistance range between $16 182 and $16 806 ($21 387 and $22 212 CAD),  followed by a 1.382 Fibonacci extension, reaching major horizontal resistance between $17 989 and $18 953 ($23 775 and $25 049 CAD), and finally, a 1.618 Fibonacci extension above $20 528 ($27 131 CAD) for a new all-time high.

 

If the long-term trend turns bearish, there will be major support in the lower $7k ($9 251 CAD) region at the 50-week simple moving average, coupled with trendline support of the 2018 descending triangle, and the 0.618 Fibonacci retracement level ($7 231 / $9 557 CAD) of theentire move from $3 122 to $13 880 ($4 126 – $18 343 CAD) i.e the golden ratio.

 

Below $7k ($9 251 CAD), there is a major horizontal support range between $6 100 and $6 500 ($8 062 and $8 591 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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