Technical analysis, especially with regard to bitcoin, remains for some an esoteric approach to investment, while for others it is an essential method to examine all the markets where the exchange is determined by a price.
The more a market becomes liquid and mature, the more it tends to approach the golden rules – or supposedly such – taught in trading fundamentals.
As far as cryptocurrencies are concerned, the discussion has been open for some years, for many it is too immature and volatile to be analyzed with traditional techniques.
Whereas for the supporters of technical analysis, understanding the psychological nature of man linked to charts and understanding the recurrences of patterns can help in making more informed choices in all situations.
It happens, however, that the analysis of the fundamentals conflicts with the technical analysis and the sudden and violent movements of the markets strongly affect emotions and portfolios.
Bitcoin: a downward channel
After what is described as a parabolic move that took BTC from $3200 to close to 14,000 in 2019, bitcoin has confirmed itself as the best performing asset of the year.
At the moment there’s a strong retracement that follows a very precise downward channel. The direction that the market will take now seems to be of great concern to investors, this precise moment is considered a key point that can give a clear response, a direction, a strong signal on the general trend.
Considering the great fall from the 20,000 dollars touched in December 2017, the wounds for bitcoin are not yet fully healed and many are wondering:
- Are we out of the 2018 Bear market / will we see new highs?
- Are we facing a giant bull trap / will we see new lows?
- Have we reached the bottom / is the downward phase definitely closed?
“Lines” of thought in technical analysis
Many people are taking an interest in this matter and on Twitter, the analyses and forecasts are going crazy.
Peter Brandt, a well-known analyst in the crypto environment, has just launched a tweet that highlights the importance of the moment.
Trendlines and boundary lines should be drawn in a manner that connects the most possible key chart points, even if it ignores some spindles. pic.twitter.com/QxBJsCSuPJ
— Peter Brandt (@PeterLBrandt) January 13, 2020
If the price should break the diagonal trendline then a new key point would appear, often acting as a pivot for a trend reversal.
If this should happen, traders’ expectations should return bullish on BTC after this strong retracement.
As Peter points out, diagonal lines act as support and resistance for the price in a less decisive way than horizontal lines, but certainly, the channel that has been created is visible and clear enough to be taken into account by many.
For some people, however, the shadows of the candles or the body itself act as a support point for the trendlines in a different way. Following a different perspective, the market has already broken with force and is about to move towards new and growing highs after the typical pullback.
Why i believe we've broke out of the upper boundary of the 7-months wedge.
i. boundary line "kisses" the most possible contact points
ii. we're sitting above the daily ma100
iii. daily ma50 has now turned upwards pic.twitter.com/MjHkTCi7UC
— CryptoWolf (@IamCryptoWolf) January 11, 2020
The unpredictability of prices is known to all, what is certain is that we are facing an important moment, all eyes are on the charts.