Technical Analysis #CW 4 2019 – Buy Bitcoin or Second Selloff?

This is the chart (fig. 1) that we used at the beginning of December. We did not predict the “Christmas rally”.  As this had been the point where the significant resistance at around 6000 broke. The market is currently still testing if the support at the 200 Weekly MA is still solid enough to prevent a further selloff. As we outlined in our last TA, the 200 Weekly MA is a significant support line. That means that if this support breaks a massive selloff is likely. However, the 200 MA is reliable and as we showed in our last TA, the markets trend to recover quickly when falling below it.

The state of the market in December (fig. 1)

The last bull run of Bitcoin started in August 2015 when Bitcoin stood at about $160. Before that, Bitcoin reached above $1000 for the first time in November 2013. Consecutively, the bear market that preceded the most recent bull run lasted 21 months (fig. 2). This is relatively long. As the average bear market lasts 14 months(on the stock market however). The current bear market is lasting 13 months already and it is very well possible that it will continue for now. Because the big players in the market, the mining pools and mining hardware producers, are in a sorry state. This undermines trust in the market. Therefore, the price will test the 200 MA likely for a while.

The bear market of 2013 – 2015 lasted 21 months (fig. 2)

Sell pressure comes from miners and from investors who bought during the bull run and that finally give up on Bitcoin. A lot of miners are currently going bankrupt and while they might still believe in Bitcoin, legal pressure could force them to liquidize their holdings. We should keep this fundamental information in mind. If a big player like Bitmain would go bankrupt, a selloff will follow due to Bitmain liquidizing its holdings and due to the negative headlines. Such a case would require a renewed fundamental analysis of the market. Are other mining pools now at risk of going bankrupt as well? Is Bitcoin’s centralization impeding further growth of the market? Do other players (re)-enter the market? Is the profitability lowered or raised?

(fig. 3)

While markets never repeat themselves, it is slowly time to load up on Bitcoin. Our trading plan on Bitcoin is to load up on Bitcoin during this bear market. It is likely that the price will go underneath the MA. Especially since the MA is slowly rising from now on. In our last TA, it was at 3200. Meanwhile, it sits at about 3300. However, there is no way to tell if a selloff happens or if a recovery will bring back the price above the MA quickly. So we will see local lows underneath the MA as entry opportunities. We will not enter the market in one All-in move but in partially and successively. This way we will ideally have funds to enter the market any time a good entry opportunity appears.

Long red candles wanted (fig. 4)

To illustrate better what we see as buy opportunities, the red arrows mark long red candles on the daily chart and whenever these occur, we buy.

Disclaimer: This technical analysis is no trading advice. It only depicts our own trading strategy and serves as a source of information. DYOR