A brief introduction into how I perceive the market

There’s been a lot of talk, fighting, arguing in the CryptoTwittosphere lately between the Bitcoin bulls and the bears fighting over the medium-term movement. Who do you believe who do you put your faith in? The answer, neither. You must put your faith in yourself, and to do so you need to improve your skill set, be willing to make mistakes and learn from those mistakes. Follow on as I work to improve my skills in Technical Analysis.

The market (in my opinion) is a living breathing collective mindset of the participating investors and traders, collectively coming together and giving hints as to what the next best move is to make, but only to those willing to look.

Pre-Analysis

First I think it helps to take a look at where we’ve come from, a quick glimpse at the chart shows it’s been almost 12 months since almost completing a full retrace from the ATH. The parabolic move upwards is known as a bubble, and when a bubble bursts they usually retrace back to where they originated, which is where we are now! From humble beginnings of approx 160bn to just over 800bn and back, we can now move forward and analyse the trends that have appeared over the last months.

Analysis

click for larger image

You’ll notice I’ve plotted three trendlines. Currently we’ve got two support trendlines, the bottom and the top with the middle acting as resistance at time of writing. The top trendline has recently switched to support having acted as significant resistance for some months, this is a good sign however as soon as we broke through the resistance we were met with the middle trendline acting as resistance and we’ve come back to retest the support of the top trendline. A positive note for the bulls is the second to last candle being a reversal hammer candle indicating the bulls are gaining strength – at least in the short term.

Divergence in technical analysis may signal a major positive or negative price move. Positive divergence occurs when the price of a security makes a new low while a key indicator such as money flow or volume starts to climb. Conversely, negative divergence is seen when the price makes a new high but the indicator being followed closes lower.

More-so the bulls have positive divergence in there favour as the RSI has been trending upwards as the price has been trending downwards.

Conclusion

Taking in the data that the chart has provided I think it’s safe to assume over the next 3 months we will see the downward bear trend reverse, there is a possibility that we will do a full retrace to 160bn or slightly lower should we see a dramatic capitulation washing out all the weak hands.

Capitulation is when investors give up any previous gains in stock prices by selling equities, to get out of the market. Capitulation involves extremely high volume and sharp declines. It also usually involves panic selling. The term is a derived from a military term which refers to surrender.

I will be watching closely for a break above the middle trendline that is currently acting as resistance, a break above would, in my opinion, be a great buy opportunity. However, now is also a good buy opportunity as the chart shows bears are loosing support and a reversal is on the horizon.

Notes from the editor @TheGayTrader aka FvKnL

Thanks for reading my article. Please comment below and let me know your opinions on the current state of the market. Sharing is caring.

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