- According to historical data, the first downturn in the MACD over three months could bode well for the price of bitcoin. Cryptocurrency could defeat 2019 above $ 13,800 before the end of the year.
- The immediate outlook, however, is bearish and prices could fall to $ 8,800 in one or two days, the daily chart showing the buyer's exhaustion. In addition, the Chinese state media has urged investors to avoid speculative behavior that could hinder trade.
- A flag breakdown on the hourly chart could result in a new test of recent highs above $ 10,000, although this seems unlikely.
A widely followed bitcoin price indicator (BTC) became bullish for the first time in more than three months, suggesting a move to annual highs.
The Mean Moving Convergence divergence (MACD) histogram – an indicator used to identify trend reversals and the strength of the trend – has exceeded zero on the three-day chart, confirming a bearish trend shift to bullish . A positive reading was last seen in the first half of July.
Experienced traders may argue that the upward trend of the MACD can not be trusted because it is based on moving averages (MA), which are lagging indicators.
Although it seems logical, the histogram can predict changes in trend and large movements, as shown in the graph below.
The MACD exceeded zero at the end of December 2018, confirming that it had reached a minimum of $ 3,100 and that it remained in bullish territory throughout the first quarter, although the Bitcoin recovery remained capped at $ 4,000.
Cryptocurrency broke into a bull market on April 2 with a convincing move over a downside of $ 4,236 created on December 24th.
The histogram fell below zero on November 14, with prices surpassing longstanding support of $ 6,000. What followed was a sale at $ 3,100.
Further back, the bullish trend of the indicator in October 2017 was followed by a meteoric rise from $ 7,000 to $ 20,000. At the same time, a sub-zero dip in early January 2018 led to a larger drop in bitcoin prices from $ 13,000 to $ 6,000.
So, if the story is a guide, the last bullish round of the MACD could see Bitcoin break out of a four-month downtrend and reach annual highs of over $ 13,800 by the end of the year.
Support the bullish case is another piece of historical data this indicates that BTC wins a strong offer six months before the halving of the mining reward scheduled for May 2020.
However, so far, the movement of the MACD above zero has had no effect on price gains. BTC is currently changing hands at $ 9,470 on Bitstamp, which represents a gain of 0.6% over 24 hours, after being pushed close to 100-day resistance to $ 9,625 during Asian trading hours.
Notably, bitcoin did not close Tuesday for the third consecutive day above the 100-day limit, after being rejected above $ 10,000 over the weekend. as seen below.
Daily chart and hourly charts
The repeated failure to keep the gains above the 100 day MA indicates the depletion of the buyer. The red candle with a long upper shadow echoes the same feeling.
As a result, the probabilities that the BTC dives out of the contracting triangle, or flag pattern, on the hourly chart are high. At the time of printing, the bottom edge of the pennant is $ 9,260.
A breakdown, if confirmed, could give way to the old support become resistance of $ 8,820 (formerly a lower lower bearish).
On the other hand, a high-volume pennant exit, if confirmed, would imply a rally recovery after exceeding Friday's $ 7,400 and would likely result in a quick break above $ 10,000.
Influence of China
Chinese state media has called on investors to stay rational and avoid speculative behavior. The warning came after Monday's sharp rise in blockchain shares in China.
Investors poured money into bitcoin and blockchain stocks after President Xi Jinping said last week that the world's second-largest economy should accelerate the adoption of blockchain technology.
Chinese official media comments may force investors to lower their expectations, which would lead to lower prices. A flag failure seems likely.
The global outlook would become bullish if and when the cryptocurrency would invalidate the downtrend at four months, as discussed on Monday.
Disclosure: The author does not hold any cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; charts by Trading View