Do not index
Do not index
Bitcoin - Bollinger Bands
Last week, we spoke about the upper Bollinger Band acting as a dynamic resistance for price action, especially if price would overextend beyond the upper BBand.
Of course, above is the chart from the last week.
Let’s take a look at today’s updated chart:
Bitcoin is indeed rejecting from the upper Bollinger Band after briefly upside deviating beyond it.
Interestingly, the upper BBands is also approximately confluent resistance with the ~$23400 Monthly Resistance, a level that BTC wasn’t able to retest as support as of late.
We’ll talk about potential downside targets on the dip in a moment but generally, when it comes to upper Bollinger Band rejections, the key thing is for price to return back into the Bands - and technically, that is clearly happening right now.
So according to the Bollinger Bands, this dip has served its purpose:
- Price is no longer overextending beyond the Bollinger Bands
- Price has returned back into the Bands
As we can see from previous historical BBand rejections, the dips that ensue can take different forms - they can be brief and shallow or a little bit deeper and drawn out.
Which do we get now?
In a strong uptrend, the best sort of retrace price can exact within the BBands is a dip into the mid-point of the Bands, so the orange 20-MA.
Interestingly, the mid-point of the Bands is flicking up considerably as of late, inching closer towards the ~$20000 Range Low of the blue-blue range.
In terms of the macro range price is finding itself in at the moment, it’s interesting also to see how the upper BBands outline the Monthly Range High Resistance and the mid-point of the Bands outline the Monthly Range Low Support, all adding to a picture of confluence.
Just to zoom out to the Monthly to give a clearer picture of the Monthly range, here it is:
As we can notice, upside wicks beyond the Range High tend to occur at this point and indeed BTC has performed some this time as well.
But at the same time, a Lower High has formed which is also something we’d discussed last week:
And if we just treat the Higher Low analogously, then this green pattern may be forming.
And because the Higher Low is a little lower than the Range Low itself, this implies that should BTC indeed dip into ~$20000, downside wicking below the Range Low (much like recent upside wicking beyond the Range High) could reasonably occur.
And this ties in with the inverse Head and Shoulders idea also shared last week:
So throughout February, if BTC indeed continues to fail to reclaim the ~$23400 level as support, BTC could enjoy some consolidation inside the blue-blue range.
And if indeed BTC pulls back a little stronger in the coming days or weeks, it will get quite emotional in the market which is why it’s important to stress now that such price behaviour would be occurring within a range and would be technically classified as consolidation.
This dip isn’t just healthy from a price-action perspective however.
It also provides a cool-down across important indicators, one of which includes the RSI.
The Monthly RSI is an indicator that I’ve spoken about a lot in recent weeks:
In late December, I discussed in a Twitter thread how it would be advantageous for the RSI to first breakout from its downtrending channel (orange), break above the green area which signifies the previous 2015 and 2018 Bear Market bottoms, and reclaim the area as support.
Thus far, the RSI has completed 2 of those 3 necessary technical steps to confirming a new macro RSI Bull Trend:
However, it’s clear the RSI is currently pointing downward, implying scope for additional downside as part of a key technical retest.
The RSI continues to follow the green path well and the RSI could drop towards the green area over the coming weeks.
However, the RSI has a history of forming Higher Lows on such dips, like it did in 2015, and so a dip into the green region would enable the formation of a new RSI Higher Low relative to the November 2022 lows.
All being said however - whether BTC gives us investors a shallow dip or a dip into the ~$20000 region, it’s important to note the positioning of BTC in terms of its Macro Downtrend:
BTC is currently just below the Macro Downtrend resistance.
And with some 425 days to the Halving, history suggests that a breakout may not occur this month, but at the earliest in March (396 days pre-Halving) or a little later in April (365 days pre-Halving).
And judging by previous historical Monthly Candles that formed in the final month below the Macro Downtrend before breaking out, these candles tend to still be green but perhaps not too explosive.
It is only once the Monthly Macro Downtrend is breached where the explosiveness in a new macro uptrend emerges.
Technically, there is still a bit of time left until the Macro Downtrend breakout and this dip may offer an opportunity of sorts, but at the same time it is becoming increasingly clear that time is running up before price breaks out into a new macro uptrend.
Thank you for reading.