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Crypto Santa Clause Rally Running Out Of Steam?

11/26/2018

Cryptocurrency Santa Clause Rally for 2018 Looks Weak

Bitcoin Technical Analysis indicates the bulls may be reaching their peak for the latest rally. Cryptocurrency enthusiasts vividly recall the massive run up in overall value in the crypto markets in Q4 of 2017, and looked to bring a little excitement to the space over the Christmas holiday. However, closer inspection indicates there may be further action to the downside in store for BTC.

Bitcoin Technical Analysis- Weekly Candles

Bitcoin Technical Analysis

Several weeks of positive price action for Bitcoin since the beginning of December likely contributed to investors nostalgia for the massive movements this time last year. Since the price dipped under 6k on November 12th. Three consecutive weeks of higher lows and higher highs have not been seen since the weeks between Oct-Sept of 2018, as seen above. While larger time frames generally trump smaller when making trading decision based on Technical Analysis, data points shown in larger time frames often can be confirmed or rejected when inspecting smaller time frames. 

BTC Technical Analysis- Daily Candles

When inspecting the daily time frame to confirm whether the bulls can continue to push the price up two things are revealed. 


First, BTC continues to ride under the long term support created from August of 2015 and Nov 20th of this year. Strong support often becomes resistance, which is easily seen in the candle patterns shown on the Daily chart above. BTC tested the support for 3 days before falling below support, retesting it as resistance nearly 6 days in a row afterwards, then crashing down to as low as $3200 on Coinbase before the most recent rally. This indicates a psychological resistance level near $4k may be the supply zone for sellers.

Second, the price action has shown a clear double top near $4400 on the Daily Candles, rejecting near its confluence with the 50 day moving average before sliding back into the high 3k range. Decreasing overall volume and fairly overbought RSI levels show the bears may be taking control back from the bulls. 

Technical Analysis- 4 Hour Candles

Indicators on the 4hour candles continue to confirm, as Bitcoin has been range bound for 24 hours between the fairly weak support near $3800 and failed to exceed $4k during any attempt for the bulls to push the price up. This could be the last ditch effort for certain investors to harvest tax gains while making up for losses by shorting the market, or it could be a sign that whales still want the price lower before re-entering the market. 

Massive speculation by retail investors as to when the rumored institutional money will flood the market has led to several false rallies over 2018. Savvy traders have been careful to preserve capital in a bear market, cautiously avoiding bull traps set to create liquidity within the market at the detriment of the uneducated. Warren Buffet once said the stock market is a method of transferring wealth from the impatient to the patient, as many people new to the cryptocurrency space have discovered over the course of 2018.

As traders lick their wounds, however, the best projects continue to develop and create the environment for a thriving decentralized economy. Whether or not the Santa Clause Rally brings the market movement of late 2017, the crypto community is breathing a sigh of relief for now.


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