Share on TwitterShare on FacebookShare on LinkedInShare on Reddit

Technical Analysis

Weekly Bitcoin Technical Analysis October 28th, 2019

Photo of Author Chris Colin
October 28, 2019
Chris Colin
Share Now
Share on TwitterShare on FacebookShare on LinkedInShare on Reddit

30% Price Surge: China Blockchain Announcement or Short Squeeze?

 

Bitcoin (BTC/USD) experienced a 30% surge in price, rising impulsively back above the 200-day simple moving average (MA200) from $7 293 ($9 529 CAD) on 23 October 2019 to a $10 350 ($13 523 CAD) swing high only 3 days later.

 

This was the reaction many bulls were hoping for after bottoming right at trendline support, before printing the highest green daily volume spike since February 2018.

The surge in price coincided with an announcement from President Xi Jinping of China, declaring that China seeks to invest heavily into blockchain techonology, however, although this does create awareness for bitcoin, the announcement is merely a narrative, and there was no direct mention of bitcoin itself.

 

It is more likely that bitcoin was in the process of bottoming, and that there was a build up of short sellers who were betting against the price of bitcoin on the derivative exchanges, had their short positions liquidated, and had to scramble to cover their bets, which ultimately drove up the price. This is referred to as a short squeeze.

 

4-Hour Chart

 

Looking at the 4-hour chart, the surge in price was accompanied with a strong bullish cross on the ADX/DI indicator (trend strength / trend direction), where +DI (bullish trend direction) crossed above -DI (negative trend direction). ADX (trend strength) has been strong and up until now has been increasing with every consecutive 4-hour candle since breaking out.

 

Bitcoin has been cooling off since peaking at $10 350 ($13 523 CAD), experiencing a 0.382 Fibonacci retracement of the surge from $7 293 to $10 350 ($9 529 to $13 523 CAD) before finding short-term support at $8 894 ($11 622 CAD).

 

There was then a bullish cross on Sunday morning with both the 4-hour 50-bar simple moving average (MA50) and the 100-bar simple moving average crossing back above the 4-hour 200-bar simple moving average (MA200).

 

The bullish cross resulted in bitcoin rebounding above major horizontal resistance at $9 386 ($12 265 CAD) with a 0.618 Fibonacci retracement of the drop from $10 350 ($13 523 CAD), but was unable to close back above major horizontal resistance at $9 770 ($12 767 CAD), nor was bitcoin able to close back above major trendline resistance connecting the swing highs from $13 880 ($18 137 CAD).

 

 

Daily Chart and False Death Cross

 

You can see on the daily chart that there was strong bullish divergence on the Money Flow Indicator (a momentum oscillator which takes both volume and price into account), where MFI printed a higher low and price printed a lower low, leading up to the 30% surge in price.

 

OBV (On-Balance-Volume) is a momentum indicator that uses volume flow to predict changes in price. OBV broke above major trendline resistance, showing serious strength, after printing a sharp V spike, both of which are very bullish signals, and indicates a change in trend direction.

 

As discussed last week, there was a bearish deathcross between the 50-day simple moving average (MA50) and the 200-day simple moving average (MA200) which, like in 2018, coincided with a major low, and a retest of all 3 major simple moving averages. The difference, this time however, is that both moving averages needed to be downward sloping, and MA200 needs to hold as resistance in order to define the cross as an official ‘Death Cross’ (typically a bearish signal when the 50-day moving average crosses below the long term 200-day moving average on the daily chart), so this was more than likely a false signal to trap shorts.

Bitcoin was able to close above daily MA200 and MA50, indicating that the major low might just be in, considering that a daily close above MA200 is seen to be the continuation of an overall uptrend. However, bitcoin was unable, at the time of writing, to close above the 100-day simple moving average (MA100) which is currently acting as major resistance at $9 640 ($12 597 CAD), and coincides with major trendline resistance connecting the swing highs from $13 880 ($18 137 CAD).

 

A close above both daily MA100, and trendline resistance could potentially see bitcoin go on to print a higher high above $10 949 ($14 306 CAD), which was the 06 September 2019 swing high. A close above $11k ($14 373 CAD) should see bitcoin go on to retest major resistance ranging between $11 900 and $12 325 ($15 548 and $16 103 CAD).

 

Weekly Chart

Looking at the weekly chart, bitcoin was unable to print a candle close below the 100-week simple moving average, only managing a wick to $7 293 ($9 529 CAD) before the 30% surge in price.

 

Bitcoin then ran into major resistance at $9 770 ($12 765 CAD), which is the previous 0.382 Fibonacci retracement level of the entire move from $3 122 to $13 880 ($4 079 to $18 137 CAD). This level also coincides with major horizontal resistance, as well as major trendline resistance, and bitcoin was unable to print a weekly close above that level.

 

The bullish trend is still in tact on the weekly ADX/DI indicator, with ADX (trend strength) still above the threshold 25 level, however, the bulls will need to step in soon because weekly trend strength is still declining, even with the 30% surge before the weekly close, and is currently sitting at the 27 level which is close to the 25 level threshold.

 

The good news is that the Relative Strength Index (RSI), which is a momentum indicator that measures the magnitude of recent price changes, has crossed back above the centerpoint level, which can be seen as a revival of bullish trend. RSI also had a bullish break out from a wedge on the weekly chart, which could potentially result in a continuation of bullish trend.

 

 

4-Hour – Major ranges of support:

 

$9 182 – $9 386 / $11 996 – $12 263 CAD(0.382 Fibonacci retracement level of surge from $7 293 to $10 350 / $9 528 – $13 522 CAD)

$8 800 – $8 960 / $11 497 – $11 706 CAD  (50% retracement level of surge from $7 293 to $10 350 / $9 528 – $13 522 CAD)

$8 460 – $8 645 / $11 053 – $11 295 CAD ( horizontal support and 0.618 Fibonacci retracement level of surge from $7 293 to $10 350 / $9 528 – $13 522 CAD)

$8 220 – $8 288 / $10 740 – $10 829 CAD (horizontal support)

 

 

4-Hour – Major ranges of resistance:

 

$9 695 – $10 000 / $12 667 – $13 065 CAD (horizontal resistance, 0.382 Fibonacci retracement of correction from $13 880 to $7 293 / $18 135 – $9 528 CAD, 0.382 Fibonacci retracement level of move from $3 122 to $13 880/ $4 079 – $18 135 CAD, trendline resistance)

$10 445 – $10 586 / $13 647 – $13 831 CAD (horizontal resistance and 50% retracement level of correction from $13 880 to $7 293 / $18 135 – $9 528 CAD)

$10 999 – $11 176 / $14 371 – $14 602 CAD (horizontal resistance and 1.214 to 1.272 Fibonacci extension of the surge from $7 293 to $10 350 / $9 528 – $13 522 CAD)

$11 518 – $11 699 / $15 049 – $15 285 CAD (1.382 Fibonacci extension of the surge from $7 293 to $10 350 / $9 528 – $13 522 CAD)

$12 024 – $12 470 / $15 710 – $16 295 CAD (horizontal resistance and 0.786 Fibonacci retracement level of correction from $13 880 to $7 293 / $18 135 – $9 528 CAD)

 

Daily – Major ranges of support:

 

$8 800 – $8 960 / $11 497 – $11 706 CAD (daily MA50, daily MA100 and 50% retracement level of surge from $7 293 to $10 350 / $9 528 – $13 522 CAD)

$8 501 – $8 703 / $11 108 – $11 372 CAD (50% retracement level of move from $3 122 to $13 880 / $4 079 – $18 135 CAD. 0.214 Fibonacci retracement level of correction from $13 880 to $7 293 / $18 135 – $9 528 CAD, and 0.618 Fibonacci retracement level of surge from $7 293 to $10 350 / $9 528 – $13 522 CAD)

$7 763 – $7 871 / $10  144 – $10 285 CAD (horizontal support)

$6 970 – $7 177 / $9 108 – $9 378 CAD (horizontal support and 0.618 Fibonacci retracement level of move from $3 122 to $13 880 / $4 079 – $18 135 CAD)

$6 500 – $6 804 / $8 493 – $8 891 CAD (horizontal support)

 

Daily – Major ranges of resistance:

 

$9 695 – $10 000 / $12 669 – $13 067 CAD (horizontal resistance, 0.382 Fibonacci retracement of correction from $13 880 to $7 293 / $18 135 – $9 528 CAD, 0.382 Fibonacci retracement level of move from $3 122 to $13 880/ $4 079 – $18 135 CAD, trendline resistance, and daily MA100)

$10 445 – $10 586 / $13 649 – $13 833 CAD (horizontal resistance and 50% retracement level of correction from $13 880 to $7 293 / $18 135 – $9 528 CAD)

$10 999 – $11 176 / $14 373 – $14 604 CAD (horizontal resistance)

$12 024 – $12 470 / $15 712 – $16 295 CAD (horizontal resistance and 0.786 Fibonacci retracement level of correction from $13 880 to $7 293 / $18 135 – $9 528 CAD)

 

Weekly – Major ranges of support:

 

$7 763 – $7 871 / $10 144 – $10 285 CAD (horizontal support)

$6 970 – $7 177 / $9 108 – $9 378 CAD  (weekly MA100)

$6 500 – $6 804 / $8 493 – $8 891 CAD (horizontal support and weekly MA50)

$6 138 – $5 830 / $8 020 – $7 618 CAD (horizontal support)

$4 641 – $4 926 / $5 829 – $6 437 CAD (weekly MA200)

 

Weekly – Major ranges of resistance:

 

$12 024 – $12 470 / $15 712 – $16 295 CAD (horizontal resistance and 0.786 Fibonacci retracement of correction from $13 880 to $7 293 / $18 135 – $9 528 CAD)

$16 182 – $16 806 / $21 145 – $21 961 CAD (1.214 – 1.272 Fibonacci extension of move from $3 122 to $13 880/ $4 079 – $18 135 CAD)

$17 989 – $18 953 / $23 507 – $24 767 CAD (1.382 Fibonacci extension of move from $3 122 to $13 880/ $4 079 – $18 135 CAD)

$20 528 – $22 000 / $26 825 – $28 748 CAD (1.618 Fibonacci extension of move from $3 122 to $13 880 / $4 079 – $18 135 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.
Share on TwitterShare on FacebookShare on LinkedInShare on Reddit
Bitbuy newsletter logo
Join our weekly newsletter.
Bitbuy newsletter logo

Join our weekly newsletter.

A new issue each week sent right to your inbox.



Bitbuy newsletter logo

Join our weekly newsletter.

Articles like this one in your inbox every week.



You may also like: