Corrective bounce from oversold territory
Robbie Liu
Nov. 28, 2019
• A likely first positive week after four consecutive negative ones
• Bounce from oversold followed by an exchange hack
• Macroeconomics benefits risky assets
The world’s largest cryptocurrency by market capitalization dropped to $6,513 on Monday, its lowest level since May, according to OKEx BTC/USDT spot price. BTC has tumbled over 30% from October end high. Last week was the fourth consecutive negative week, and BTC has offset the gains from late October’s pump. The last time BTC suffered a four consecutive negative week was around July to August 2016. A strong rebound happened on Wednesday when BTC pumped from $6,800 to $7,600, and surpass its 50-week and 10-week MA at this moment, which is a good sign for mid-range price expectation.
Technical Analysis
On October 25, A Doji candlestick appeared on the 4-Hour chart around 12 PM Hong Kong time, then BTC rebounded from$ 6,500 and entered consolidation. And the following surge from $6,500 was the first time in weeks that bulls put up a significant fight against the downtrend. On Wednesday afternoon HK time, Upbit confirms the 342,000 ETH hack and also states that they will cover the loss, which put Bitcoin price under another pressure to retest $6,800 area. But the market bottomed out after the news released. Around 6 PM on Wednesday, BTC started the rally and performed a 10% plus price increase in 10 hours. Though price action remains uncertain on the daily chart, a firm close above prior resistance near $7,400 gives the market much confidence.
On the OKEx BTC quarterly future 4H chart, we can find BTC has finished an inverse header & shoulder breakout on a lower time frame. For a higher time frame breakout, BTC needs a move above $8,100.
Chart 1: OKEx BTC quarterly future 4H — Tradingview
Sentiment Analysis
We look at OKEx trading data, which can help investors to better judge the market and make better trading decisions. On November 21st, BTC Long/Short ratio went above 1.8. We should pay attention to the risk from the imbalance of this ratio. This indicator shows the ratio of users with net long vs short positions over a period. A 1.8 Long/Short ratio indicates that too many traders are in the long positions.
The BTC Basis usually reflects the trader’s expectation of the asset’s future expectation. When the basis is positive, it shows that the market is bullish on the market outlook, and the traders’ sentiment is optimistic. But we can see the negative BTC Basis from Nov 23rd to 25th, which shows that the market is bearish on the outlook, and the traders’ short-selling sentiment is strong.
The appearances of negative BTC Basis in this year have repeatedly become the turning point of the price trend, a good time to buy. However, the multiple long-term negative BTC Basis in Yr2018 have caused the price of Bitcoin to change from bullish to bearish.
Macro Economics
The three major U.S. stock index hit new highs this week, and S&P500 made this year’s 23rd historical high. Gold suffers an over 5% drop since its early September high. Under current global dovish monetary policies, equities can still produce decent returns in a non-recessionary slowdown. Also, the appetite of investors turns to risky assets rather than safe-haven assets.
Preview of the week ahead
After a big pullback and reversal, we pay attention to $7,400 where could be a start point of another strong rally to $8,100. On the downside, $7,000 is still the level that can push the market back to bearish.
Happy Thanksgiving to our readers & Happy Trading.
Disclaimer: Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
Published at Thu, 28 Nov 2019 11:09:43 +0000
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