Bitcoin bullish divergence looming, and why I'm still bearish
Happy Tuesday gang.
For those that read Sunday's article, we have a potential bullish divergence between the price of bitcoin and the stochastic indicator. As expected, it did not technically confirm on Monday due to the formation of a new low. However, in early trading today it looks nearly inevitable that yesterday's low will confirm. Bitcoin rallied almost 300 points overnight to re-test the resistance at 7150. So far the re-test has failed but as this article is being written, it looks like it's having another go at it.
Looking at the hourly chart shows a much more bearish pattern forming with a double top and also slight bearish divergence between price and stochastic oscillator. The next 24 hours will be very telling in the future direction of the price of bitcoin. A confident break above 7150 would invalidate the bearish divergence and double top, lending credence to the bullish divergence on the daily chart. This could give traders confidence to hop in long and pump the price up. Sometimes it feels like we're just a few busted technicals away from the next bull run. On the contrary, if the 7150 resistance holds and bitcoin plunges past 6850, then the bullish divergence would still not validate since a new low would be made.
It's worth noting that the '13 market cycle saw many invalidated bullish divergences on the bear run after the market top. Typically the oscillators are more handy in choppy markets and may give false signals when big moves are beginning, or if the market is in a strong trend. It's best to stick to price action or use the oscillators on smaller time frames for entry/exit in these conditions.
As I've stated in previous articles, I believe we'll put in a bottom sometime in September with the bull run kicking off sometime in October or November. To do so, there may need to be a catalyst. One thing to keep an eye on is the Bitcoin Cash hard fork which is scheduled for November 15. If this goes through (as it seems it will), there may be some folks jumping ship, as there have been at each previous hard fork. Bitcoin Cash occupies a not-insignificant portion of the total cryptocurrency market which, if absorbed by BTC, could serve as a boost. Just speculation.
Stay safu, fam.
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