On Monday, after the price fell to an intraday low of $45,672, Bitcoin’s short-term prospects deteriorated, and it was a far cry from the expected rebound of over $50,000 over the weekend.
As the year draws to a close, close to 33% of historical highs, traders are likely to re-adjust their expectations and further push the BTC target of $100,000 to 2022.
Day traders, 4-hour chart observers, and over-leveraged bulls may panic (unless they go short from $50,000 during the weekend or this morning when they are weak), but let’s narrow it down and look at the position of Bitcoin prices.
In the daily time frame, we can see that prices are struggling to break through the lower daily highs. Except for falling to $42,000 on December 4, traders seem to be worried about buying in the recent decline.
Tracking the moving average has always been a relatively simple way of BTC volatility trading. The current 20-day moving average (blue) is lower than the 50-day moving average (orange). Some traders just buy when the asset’s daily closing price is above the 20 moving average and sell when the price drops below that level, because this is a sign that the short-term trend is weakening.
Following this approach, momentum traders may wait for the daily closing price of BTC to be higher than the moving average of $53,000 before opening a new long position. More risk-averse traders may consider waiting for the convergence between the 20 and 50 moving averages as a clearer sign of a trend reversal. A quick look at last year’s price movements proves that this strategy is very effective.
Why some traders expect more downside
More experienced traders know that Bitcoin prices have a tendency to form double tops, M tops, and head-and-shoulders patterns after hitting historical highs. Recently, analysts on Crypto Twitter pointed out what they think is a double top, which is an obvious trend reversal pattern.
Looking at the daily time frame, we can begin to see the beginning of the head and shoulders pattern. The current decline and subsequent integration may finally complete the right shoulder, with a neckline of $41,500 and a target price close to an unbelievably low number, so it will not be written here.
Traders will also notice that the neckline of the aforementioned head and shoulders pattern is consistent with the huge gap on the Volume Distribution Visible Range (VPVR) indicator, which shows increased buying interest at the $40,000 level.
At present, it is too early to make a fuss about the existence of the H&S model, especially the analysis of price trends cannot be determined by a single indicator, but it is still worthy of attention.
Bitcoin S/R update according to Volume Profile:
US$47,000 has been a good support recently, but if we break it, our next strong support is US$40,000.
On the other hand, if we can break the resistance of 50,600 USD, then the next resistance is 56,000 USD.
Let’s see which setting will work! pic.twitter.com/hcmvmUbVln
-Whale Map (@whale_map) December 11, 2021
Data from the on-chain analysis agency Whalemap also pointed out that the $40,000 level is an area that requires close attention. Whalemap analysts said in an interview with Cointelegraph,
“Basically, if we start to close the daily chart below the above support level, we may go lower. The nearest below us is about $40,000.”
Although Bitcoin’s current price movement hardly inspires the confidence of traders who bought higher in December or traded with an expected price in the range of $74,000 to $80,000, analyst Mohit Sorout recently pointed out that the negative funding phase has been proven It is a good buying opportunity.
-Mohit Soout (@singhsoro) December 11, 2021
In the daily time frame, the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) are also oversold, both of which historically point to the accumulation phase and a good opportunity for the dollar cost average to enter new long positions.
The views and opinions expressed here only represent the views of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading action involves risk, and you should conduct your own research when making a decision.