This weekend has been nothing but boring in terms of price action. After a Sunday bear trap for the second time this weekend Bitcoin’s price dropped to trhe low $360 only to bounce right back up to the $370 levels. In our last technical analysis we analyzed the positive divergence which was forming between the OBV and the price. This divergence signaled major price movement and a possible trend reversal, while no major market action occurred just yet does not mean that it won’t happen any time soon.
Chart from bitcoinwisdom.com
The chart above shows the breakdown of the last support level, which was right around $375. The last drop from $375 is significant because it signals that the bears are in control since the support zone did not hold. When such technical indicators form, traders will usually short the security in question and additional sell pressure is expected. At this point it is unlikely that we will see the price climb much higher as support is barely holding.
TReano from tradingview points out an interesting idea for the current market situation. He compared the current price action to that of 2 years ago right after the bubble burst. “The picture we are plotting currently reminds me of the 2014 run after the big decline.” While it’s true that one can find patterns anywhere on the chart, in both scenarios the Bitcoin market was facing adversities. Back in 2014 the elephant in the room was the bubble bursting and the price crashing to $300; currently the civil war in the Bitcoin community is the elephant in the room, and the debate over the blocksize is causing hardships for Bitcoin’s launch to the moon.
Chart from tradingview.com
With the still ongoing civil war about the Blocksize limit which isn’t showing any significant development still today I would keep a slightly bearish sentiment overall. The 2000 CNY-0.81% level should be a major and significant support you should watch very closely if it gets approached.
An important advice to remember when trading a high risk asset like Bitcoin is to never fomo or chase trade. Fear of missing out, sometimes also called Follow the heard is a trading mentality adopted by usually inexperienced traders that follow a trend that the majority of people around them follow. While such a trading technique may work, there will always be times where the market moves against all odds in the opposite direction, in such cases the lone wolf traders are the ones who will claim profit. On the other hand, some traders decide that following the herd will do them no good and decide to play against the market. Many times what ends up happening is traders start chasing the market and entering positions long after the trend has been established.
In both cases if you are simply looking at what others are saying in regards to the price action you will always encounter failure because your decisions are based on emotion and often times are irrational. A perfect example is during the dot com bubble when many investors entered at the peak of the market causing considerable losses after the crash. An experienced trader will use technical analysis tools and indicators to decide on a position and will never make a trade based on emotion or based on public opinion.
It is easy to say never to trade on emotion, but when you wake up to Bitcoin’s price drop and you face losses of multiple thousand dollars it is definitely easier to just dump at the current price and cut your losses. However, in most cases waiting a few hours after the market crashes and rebounds will save you a few hundred dollars.
Chart from bitcoincharts.com
The current RSI (Relative Strength Index) is 40.65 which is one the lowest it’s been this week. The current OBV (On Balance Volume) is 397.5 which is also the lowest its been this week. If you liked this article follow us on twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin and altcoin price analysis and the latest cryptocurrency news.