Bitcoin
Bitcoin Market Technical Analysis: November 27, 2017
The long Thanksgiving weekend had no effect on containing the raging bulls driving the price of Bitcoin. Over the last two days (November 25th and 26th), Bitcoin has once again made new all-time highs.
In our last analysis of Bitcoin dated November 22, 2017, we pointed out that price was hovering near the edge of the uptrend channel at about $8354.46, and would likely retrace into the uptrend-channel zone back to the lower line before resuming the uptrend to new highs.
While price did retrace slightly to about $7770.00, it went nowhere near the lower trend line of the channel before it turned around on November 24th, and once again broke through the upper trend line.
As can be seen in the daily chart below, Bitcoin closed higher for the following two days (25th and 26th), and is setup to close up again today (November 27th).
Chart #1: Bitcoin Daily
Normally, a move of this sort would be a cause for bullish optimism, especially for a Bitcoin market that has been on a non-stop uptrend that doesn’t seem to be deterred by anything.
However, a close analysis of volume patterns may evoke a more cautionary sentiment, at least for the near term.
The daily chart above (Chart #1) shows volume diminishing as price rises for the most recent price upswing.
Chart #2: Bitcoin 5-Minute
Chart #2 shows a 5-minute chart that zooms in to the section where price breaks through the upper line of the uptrend-channel (shaded area).
A close inspection of the volume spikes indicates that some spikes correspond with upward price movements (blue arrows), while others correspond with downward price movements (red arrows).
There is no consistency in one direction or another, indicating uncertainty in the market.
This requires traders to consider the question: Is this a case of demand (bullish buyers) overwhelming supply (sellers), or a case of limit supply resulting from sellers staying home for the holiday?
The latter seems more likely given the patterns exhibited by volume.
What’s more important to consider is the probable outcome if this proposition is true.
Once the market returns to normal non-holiday activity, traders will adjust their positions accordingly, which could result in a significant and unpredictable price movement. Once normalized, the market should exhibit more certainty in its indications of direction.
Technical analysis is based analyzing markets for consistency in price behavior.
When a market experiences an overall change due to significant events, changes in fundamentals, or holidays, technical analysis becomes less reliable.
The savvy trader will wait for markets to normalize before taking action.
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Image courtesy of Shinya Suzuki via Flickr