Daily Report – Bitcoin and Market Update (July 2 2022) – The Birb Nest
HTF 12H:
The middaily chart has been printing new bars within the swing low area, right over the 18000 USD level.
Price action wise, bitcoin continues to chop around in a flat movement, sideways trajectory. The downwards trend slowed down and switched to horizontal orientation. However, one should not cross out of the list an opportunity for BTC to drop lower.
The CTF Trailer has adjusted the breakout threshold downwards. Now, the bitcoin bulls must reclaim the Stop level at $21915, in order to reclaim the upper vote in the market. Until they do so, the bears remain in charge and may add on selling pressure at any time. The price action is vulnerable, for that reason.
Historically, making contrarian moves into 75-85% drawdown off the peak has benefited the buyers more than the sellers. This translates to a higher empirical probability (frequency of occurences), in favour of the low-buyers. The fact that bitcoin trades below the 200-week average may be considered an opportunity, if the risk control is applied.
MTF 4H:
The MTF chart has switched the bitcoin’s polarity more to the downside, after breaking below the main, critical support at $20600.
Now, BTC is controlled by the bears, based on the CTF Trailer indicator, of the BPRO trend-following breakout system. As long as it trades below the breakout threshold at 20300 USD, the short-term bears hold the upper hand.
Price action based breakout would consider the range pattern forming between 17500 USD and 21700 USD, with an overthrow on top. A breakout with retest to the upside may confirm upwards acceleration.
However, relevant support levels rest at $18985 (19000 USD) and $17104 as given by the BPRO. At the same time, the BPRO Level Lines define resistances at following anchors:
31192
28481
21440
These levels could be anticipated to serve as level-to-level references. In other words, when one level is breached, the next one in the direction of the movement
LTF 1H:
The hourly chart shows the bars forming a divergence signal, based on the BPRO Divergence System.
While this is not a guarantee of a reversal, this is a market hint that the prior local trend (downwards) is overextended. For that, the trend sentiment is oversold and may soon proceed to revert back upwards. It is rarely an immediate signal. It may take time to process the pattern to unfold.
The local consolidation pattern trades between the 18500 USD support, and the 21000 USD resistance, giving it a base size of 2500 USD. This may give an estimated effect implied based on the breakout, when it happens – to the downside, or to the upside.
An upwards breakout would require reclaiming the AVWAP (anchored volume weighted average price) at 19993 USD. However, for the round number psychology and proximity, I would argue that the 20000 USD level is more relevant. As behavioral finance explains, traders tend to anchor and favor round numbers, which results in orders clustering around the zone.
The BWAP base (orange block) seems to be building a support for the intraday traders.
FEAR/GREED INDEX:
The sentiment continues to crawl in its historical lows as the capitulation stage extends.
Now, at 14 points in the index scale, out of 100, no day seems to be bringing any sort of a relief. Instead, the hopelessness develops as the time progresses. This would confirm the typical chart pattern formation. Usually, the longer the consolidation pattern takes to unfold, the more fear is getting escalated by the traders, as they suffer from cognitive dissonance and loss aversion bias (prospect theory). Historically, such a pattern is referred to as accumulation phase.
Bitcoin: Net Unrealized Profit/Loss (NUPL)
The NUPL ratio, now at -0.15, is at historical lows and is considered low. This belongs under the capitulation category, from the on-chain perspective. Purchases within the capitulation and the panic selling have historically been proven to be more profitable than selling. Remember, however, that bitcoin tends to put in the cyclical troughs at 80-90% drawdown levels, more often than at -75%.
For this reason, the chances are that there might be still more pain to come for traders. Risk management and portfolio diversification are essential to avoid the risk of ruin in the market.
More details to be found in my yesterday’s webinar. Find it linked below.
Hope it helps! God bless!