August 2, 2021
Trades & Tutorials
Last week was a wild week in the cryptocurrency market. Sentiment has quickly changed from 50/50 bullish vs. bearish to almost entirely bullish in just the last 10 days. This is indicative of the significance that non-technical factors can have in the price action of cryptos.
On the other hand, technical analysis of recent market action spells out clear trade opportunities that investor sentiment may ignore.
Similar to the S&P 500 (SPY) being commonly used as a benchmark for the stock market, Bitcoin (BTC) has and continues to be the best gauge for determining the overall sentiment and activity of the cryptocurrency market.
During cycle changes, Bitcoin has historically moved first and set the pace for the remainder of the market (with the occasional exception of Ethereum being the first mover).
Likely being catalyzed by The B Word virtual conference featuring Jack Dorsey, Elon Musk and Cathie Wood, Bitcoin made a significant move starting on 7/21 from $29,500 to a daily close around $32,150. This one day move of +9% was built off of the largest support level ever recorded by Binance’s exchange order book at $30,000.
It wouldn’t be a surprise to see a sudden drop in price as Bitcoin establishes strength at higher levels, but you can expect BTC to stay above the 30k support area for the foreseeable future. [Chart Below]
So now you’re seeing this chart of Bitcoin’s performance up to 7/30 and wondering when would have been the right time to buy… I mean just look, BTC had 8 green days in a row (the longest streak since October, 2015). The most obvious buying opportunity appears to be when price gets back over the 50-DMA (blue line) around $34,200.
However, in our July 25th issue of Market Outlook, we pointed out that a move higher was likely if it broke above $33,000.
Our analysis was based on our Real Motion (RM) indicator. Using Real Motion, you would have seen a buying opportunity several days before Bitcoin’s price broke through its 50-DMA. [Chart Below]
The first indication to anticipate a bullish move is the divergence between the positions of the moving averages in the price action vs. Real Motion. The 10-DMA (red) is under the 50-DMA (blue) in the price chart. Meanwhile, the Real Motion chart has had the opposite condition since mid-June. Its 10-DMA (blue) is over its 50-DMA (green). That defines the ‘divergence.’
A Real Motion divergence like this indicates that momentum in Bitcoin has begun to turn bullish, even if the price action may look bearish.
Next, there was a more specific and timely Real Motions ‘alert.’
The red circle on the chart above highlights the big move on 7/21 that I mentioned earlier. This highlights the day BTC was able to close over its 10-DMA after over a week underneath it.
It also highlights a very significant Real Motion (RM) reversal pattern right at RM’s 200-DMA and the lower Bollinger band, which is often a reversal level. Then it closed over its 10-DMA, which confirmed the price’s close over its t0-DMA.
This progression of events – bullish RM divergence, RM reversal at support, and RM confirming price breaking a resistance level, is a reliable buying opportunity.
In this case, it alerted you 3 full days before Bitcoin’s price action would have given you a buy signal based on price breaking its 50-DMA.
Currently BTC is sitting right above $41,000, with market sentiment once again being a battle between the bears expecting a crash back down to $30,000, and the bulls hoping for a move over $41,000 with the next level to beat around $43,500.
Expect the altcoin market (any cryptocurrency that is not Bitcoin) to continue to follow Bitcoin’s trend, whichever way it decides to move over the coming weeks.