Bitcoin Price Analysis (September 18th, 2024)

Its been a long time since we've done a Bitcoin price analysis. But figured that there's no time better than the present for us to explore exactly what the fuck is going on as it pertains to Bitcoin. First, we're going to look at the overall price action and then move from there.

Daily Resolution

We're going to start with the daily resolution like we usually do to get an idea of what's going to happen in the not-so-distant future.

Since this is our time charting in a little while, let's establish a few status quos.

1. We're going with the 'Coinbase' chart for BTC/USD.

2. We're starting on the daily resolution (which means that we're looking at the 1-day chart; every candle = 1 day's worth of price data).

Beyond that, we're going to our chart mode to 'logarithmic'. We do that by first right-clicking on the price scale presented on the righthand side of our chart (where it gives us the price of our asset). Doing so, will pop up a context menu specific to this web app. In that context menu, we're going to tick the option that reads 'logarithmic'.

Purpose of Changing Our Chart Mode to Logarithmic

Our first step in charting any asset is to plot the resistance and support points. Some of those areas will require us to draw diagonal lines connecting various low's or high's in the price data that span back a few days, months or possibly even years in some cases.

Given Bitcoin's volatile price action at various points in time, it is more than likely that we'll capture price data in this span that's a substantial distance from the current price. If we stick with Bitcoin, for example, the price is ~$56,000 at the time of writing. However, just a few months prior on January 23rd, 2024, Bitcoin was floating around ~$39,000.

In less than two months from that point, the price spiked all the way up to ~$73k, representing an +88.25% increase.

Resistance and Support Points

We're going to start by applying the overhead diagonal resistance to the price action. As we'll see below, this resistance spans all the way back to June 2024 on our daily resolution.

From here, we're going to plot the underlying support at $54k.

Some Initial Takeaways

We can see that the price of Bitcoin is currently in a descending triangle, which is a bearish pattern. So that's one negative for the bulls already out the gate. Also, the overhead diagonal resistance that we plotted has been firmly established via two additional touches, reinforcing the strength of this overhead resistance.

So for those that are wondering whether Bitcoin's price action appears "bearish" or "bullish", the answer is definitively bearish if we're to judge from how the price has reacted to various support and resistance points on the daily resolution.

Update on the Descending Triangle

Its been a few days since those initial screenshots were taken. With that in consideration, let's go take a look at Bitcoin's price action relative to those resistance points that we identified above as well as the descending triangle pattern that we identified.

As we can see in the chart above, Bitcoin's price action is moving as expected. At the time of writing, it appears that the price is on a crash course toward are overhead diagonal resistance that we juste plotted. (forming one of the legs of our descending triangle pattern).

Based on the descending triangle chart pattern and general knowledge when it comes to resistance and support points, it only makes sense that we'd expect Bitcoin's price to retreat after hitting this diagonal overhead resistance.

However, nothing is a guarantee and patterns are broken all the time in the world of trading. So let's see what some of the other indicators are telling us.

Overlay Chat Indicators

Now we're going to take a look at some custom overlay indicators as well as some classic/traditional ones to get a better sense of the overall sentiment for Bitcoin in both the short and long-term.

If you're wondering what our rationale is for doing so when we determined that the resistance and support points (along with the emerging descending triangle pattern) is forecasting bearish price action.

Librehash Reversion Ribbon v2

We'll start with the Librehash Reversion Ribbon v2 first (custom indicator).

Below are some things worth noting:

1. Recently, the ribbon has 'reverted'. This means that the faster moving average has crossed above the slower one. That's a sign of a trend reversal. As we can see, this occurred on the daily resolution about 3 or so days ago (we'll identify that after this mini-section).

2. The ribbon itself is still below the histogram. However, we can see that the ribbon's direction has pivoted to ascending from its prior downward slope.

3. The histogram also reveals that the ribbon (now green & signaling bullish activity) is still expanding for each successive bar preceding it over the past 6 periods. That's pretty bullish (at least in the short-term). This signals increasing buy pressure for Bitcoin on the daily resolution during this span of time.

With those points established, let's take a look at the annotated chart formation below:

Now let's check out a few other indicators to see what they're telling us here on the daily resolution.

Exponential Moving Averages

From here, we're going to take a look at the exponential moving averages for Bitcoin (we'll cover our rationale for why we use the EMAs vs. the other moving average types).

Check out the chart below:

In the chart above we have the EMA-12 (purple), EMA-26 (green) and the EMA-50 (yellow) lines plotted out.

As we can see in the chart above, the EMA's are stacked in the following order: EMA50 > EMA26 > EMA12.

That's a bearish stack.

However, there are a few things worth noting:

1. There is an underlying support at $57.1k which is created with the EMA-12.

2. There are two overhead resistance points created by the EMA-26 and EMA-50. The EMA-26 gives us an overhead resistance at $58.3k and the EMA-50 gives us resistance at $59.6k.

3. Typically, when it comes to gauging the strength of the resistance or support conferred by EMA indicators, strength is positively correlated with the time frame of lookback on the indicator. So in laymen's terms what that means is that the longer the EMA period, the stronger the resistance or support point will be. So the EMA-50 will provide a greater resistance to price than the EMA-12 or EMA-26 would.

If we pan back out a little further and add on the EMA-100 and EMA-200 to our chart, we'll gain a lot more insight about the true status of Bitcoin's market cycle.

In the screenshot above, we have the EMA-50 (golden line), EMA-100 (red line) and the EMA-200 (blue line).

There are a few substantial observations to be noted here:

1. Death Cross Has Not Occurred: Numerous media outlets have claimed that a death cross formed or is in the process of forming over the past few weeks. As a quick refresher, a 'death cross' is symbolized by a 50 period moving average crossing below a 200 period moving average. In the article I linked here from CoinDesk, the author mentioned the alleged imminent crossing of the 50-day SMA (simple moving average) below the 200-day SMA. However, for an asset like Bitcoin we want to look at the exponential moving averages, not the SMA or other MA indicators. This is to account for the exponential change (positive or negative) in Bitcoin's price over the past 50 to 200 days.

2. All Averages are Within ~5% of the Current Price - This singular factor presents one of the most compelling cases for bulls (among all overlay indicators, resistance/support points, etc.). To be clear, when I say that all averages are within ~5% of the current price, I'm stating that among all essential EMA lookbacks (12, 26, 50, 100 and 200), the EMA that's furthest away from Bitcoin's current value only deviates from it by ~5%. Elaborating on that last point above, the EMA that is the furthest distance away from the current price action is the EMA-200. At the time of writing, its value is sitting at $60.9k.

Check that out below:

What This Means

If we pan out our charts a little bit, we can see that this price also coincides with some other notable 'tested' supports and resistance points on the daily resolution.

As we can see on the chart above, this price point has served as a tested support/resistance point 8 different times since March 2024 (that's only 6 months).

Why This is Significant

In situations where there is a major support/resistance point on an asset's price chart and that asset happens to break through that support or resistance with opposing force (i.e., bulls busting through a resistance; bears busting below a support), the price action typically surges from that point going forward.

Let's check out some examples of Bitcoin's price action spanning back to March 2024 in instances where the price fell below or was already below this overhead resistance and it ended up breaking through.

Here are the actual results (and specific time frames):

• February 28th, 2024-March 13th, 2024: +27.56%

• May 2nd, 2024 - May 21st, 2024: +22.82%

• July 7th, 2024 - July 21st, 2024: +21.93%

• August 5th, 2024 - August 8th, 2024: +14.13%

• August 16th, 2024 - August 25th, 2024: +11.52%

Additionally, in instances where the price had broken above this overhead resistance (converting it to a support) then faced a later correction that plunged it below the newly created underlying support, the net decline in price below that threshold has always been limited (compared to the overall descent from the price's prior localized top).

Below are some examples to emphasize what I mean:

April 30th, 2024 - May 2nd, 2024

July 4th, 2024 - July 8th, 2024

August 4th, 2024 - August 6th, 2024

August 14th, 2024 - August 15th, 2024

As we can see from the examples above, the furthest the price has corrected below the current major overhead resistance ($59k), has been approximately ~10%. Which, normally would be considered to be a steep loss. But when dealing with an asset that's as volatile as Bitcoin, this is far from anything one could consider to be a "major loss" within the scope of Bitcoin and cryptocurrency price changes.

Brief Price Update

Similar to the prior section, we're doing an intermittent update on our price analysis to see what these EMA values are reading at the time of writing and what that means for Bitcoin's price moving forward.

Below is a chart overlaid with each EMA that we discussed above:

In this chart, we have the EMA-12 (dark purple), EMA-26 (green line), EMA-50 (golden line), EMA-100 (blue) and EMA-200 (red). As we can see, all of the EMA indicators are bunched up together here, which tells us that the price hasn't deviated that much over the past 200 periods.

As we can see, the price has broken above the EMA-12, EMA-26, EMA-50 and EMA-200 (curiously), making each one of these points an underlying support now. Our overhead resistance now is posed by the EMA-100 (red line). The EMA-100 line is just below the resistance zone that we marked through the overhead diagonal downtrend resistance.

So we have two strong overhead resistance points. This is something worthy of note. Now let's go on to see the values for the rest of the indicators.

Balance of Power RSI

This indicator is a custom one that I created with a special purpose. It integrates the RSI and the normal "Balance of Power" indicator alongside an EMA indicator to smooth the values and give us an intelligible reading.

What makes the Balance of Power RSI so useful is the fact that it forecasts changes in buy or sell pressure that diverge significantly from current price action. In other words, this is a great indicator to use when you're looking to gauge true market sentiment at a given point in time.

Let's see what values the indicator is giving us at at the time of writing:

Above, we can see the Balance of Power has shot straight up and is close to breaking outside of the neutral zone (purple background).

As we can see above, the Balance of Power RSI has soared from a zone of extreme selling pressure to extreme buy pressure. Typically, this reflects a surge in bullish price action.

However, when considering the price's stagnation at the two major overhead resistance points that we identified earlier, the stagnation in price action is worth noting in light of the Balance of Power RSI's reading.

Librehash RSI(14)

Here's another custom indicator. What makes this one particularly useful is the fact that it takes the usual RSI(14) and then provides a color change for the indicator whenever an EMA(9) of the RSI(14) crosses above or below a slower exponential moving average. This methodology was made concrete back in 2018 and has proven to be a reliable measure of price action ever since.

We're going to break this down a lot further because the RSI(14) isn't reading the way you might think it is from first glance

Right now, the Librehash RSI is flashing green, which shows an increase in momentum. Additionally, the indicator has pivoted upward since September 5th, 2024.

However, we're going to take a look at one critical factor that undermines any potential bullish reading that we could extract from the RSI.

In the chart above, we can see that the RSI has made successively lower highs spanning back to July 2024. The next 'lower high' came in late August 2024. And now, a little past midway in September, we are once again seeing what appears to be an even lower high than the one immediately preceding it a month prior.

Within the scope of interpreting the RSI indicator, this should be interpreted as bearish. It signals an overall decrease in price momentum. The next question to ask ourselves now is whether this represents a continuation of an already existing bearish trend or bearish divergence.

1. Bearish Divergence - This occurs when the RSI is making 'lower highs' while the price (at the same time) is making 'higher highs'. So, for example, let's say the price of Bitcoin were $45k at the first high. Then at the second high, it was at $52k. Then at the 3rd high, it was $60k. In that scenario, we would have what's called "bearish divergence". This essentially means that the indicator is showing an underlying weakening of bullish momentum over a span of time in a way that suggests the ongoing price rally in that scenario is running out of fuel. In such cases, traders would be wise to begin looking out for potential reverses and/or events or other technical indicators that can be used to confirm the (potentially) impending bearish price action.

2. Bearish Continuation - This scenario is a bit more simple. Once again, we'll assume the Librehash RSI in our fictional example is showing the same values they are on our Bitcoin chart presently. However, when the first high was reached, the price of Bitcoin was $64k. When the RSI notched its second (lower) high, the price of Bitcoin was at $58k. And when the RSI notched its third successively lower high, the price of Bitcoin shrunk down to $54k. In that instance, we would have what's called a "bearish continuation". Simply put, the term is defined intuitively as defining a scenario where whatever bearish trend was prevailing at the time of the analysis will simply continue.

In order to assess which situation we're dealing with, we need to take a look at where the price when the Librehash RSI was notching these consecutive, successive lower highs.

As we can see in the chart above, these consecutive successively lower highs from the Librehash RSI span from July to September (currently). These events occurred on July 21st, August 25th and September 13th (just a few days ago).

Below we have Bitcoin's price (closing) on those dates:

• July 21st, 2024: $68,818

• August 25th, 2024: $64,251

• September 13th, 2024: $60,543

So we can definitively state that the price also notched lower highs that corresponded with those dates as well. So what we have here is a bearish continuation.

So that should be all for our RSI reading then, correct? Not so fast.

Conflicting RSI Signal

If you were looking carefully at the original Librehash RSI chart that we posted up, you may have noticed that while there were successively lower highs being formed by the RSI, we also saw successively higher lows at the same time.

For those that are students of technical analysis, we know that this is considered to be a bullish signal within the scope of RSI.

In case you missed it, let's go ahead and take a another look at our RSI chart below:

As we can see above, there are two successively higher lows that have been notched. They occurred on August 8th, 2024, and September 10th, 2024, respectively.

Now let's take a look at what Bitcoin's price was on those respective dates.

Bitcoin's price on those two dates (from the chart above):

• August 8th, 2024: $61,705

• September 10th, 2024: $57,645

With this information in-hand, we can now say that the RSI is also showing us bullish divergence alongside a bearish continuation. So which one will prevail?

How to Interpret these Readings

If you're confused, don't worry. We're going to break down what's going on and what this means right now. First, we're going to recap all the observations we made related to Bitcoin's RSI.

Right now we're looking at the RSI for a given price chart and we can see that it has made successively lower highs. During that point in time, the price has also notched lower highs. Also, the RSI has notched 3 successively higher lows over that same span of time. This is normally seen as an increase in buy pressure while the sell pressure has decreased gradually.

However, during those successively higher lows, the asset notched consecutive successively lower prices over that span of time too. Conventionally, this should indicate some underlying positive divergence as well.

All of this results in RSI values that make the indicator look as though it's in the 'flag' part of a pennant formation. However, the only difference here is that it's not easy for us to gauge where the price may go due to the conflicting signals given by the indicator. Therefore, we're going to have to wait until the indicator provides a value that makes it impossible for the other trend to remain true.

The reason why this must be the case is because the RSI cannot keep consistently notching lower highs while also making higher lows because, at some point, one must surpass the other.

Either the next 'lower high' must be lower than what the next higher low could be, or vice versa. Thus, based on charting logic, it stands to reason that we won't truly know how the price will move until we see the RSI 'break out' of this pennant-like formation that it is in and head either north or south of our flag formation.

To recap, what we know thus far about the RSI is that:

1. It has posed consecutive, successively lower highs over the past 3 months for a certain asset.

2. That certain asset has also had consecutive successively lower price values that have coincided with these lower highs of the RSI. We understand this to be indicative of a bearish continuation within the scope of interpreting the RSI indicator.

3. During this same span of time, the RSI has also notched consecutive successively higher lows for a certain asset.

4. At the times that those consecutively higher lows were notched, the price of this certain asset was consecutively lower. That means that in this scope of our RSI interpretation, we can detect bullish divergence in the price action.

Conclusion

With all things considered, the overall forecast for Bitcoin here in this price analysis is bearish. Even though many of our indicators are giving readings close to the overbought / extreme buy pressure range, that still doesn't nullify the existence of a remarkably strong overhead diagonal downtrend resistance, coupled with the overhead resistance posed by the EMA-100.

Beyond that, there's also the fact that Bitcoin is in a bearish chart formation (descending triangle) that has been playing out according to script at this point.

With that being said, we're going to go ahead and chart our proposed short on Bitcoin. In the time it took me to get around to writing this conclusion, I discovered that Bitcoin had broken above its overhead diagonal resistance (surprise, surprise).

Let's check out the most recent price action.

With that being said, I’m going to have to revise my initial analysis and flip this over to bullish. Bitcoin broke above a major overhead diagonal downtrend resistance. And it did so with volume. Plus the candles are looking strong too. Everything I see here is screaming buy at this point. These are all the bullish signals we were looking for when this analysis was first done.

So everything we said about the lower highs has been invalidated. The higher lows are no longer relevant as well. What we have now is bullish divergence. That, coupled with Bitcoin’s break above the overhead resistance, is extremely bullish.

Therefore, our R/R on this trade is as follows: