Disclaimer: The ideas presented in this article should not be taken for investment advice, and are simply the views and opinions of the authors.
This is the fourth weekly collaboration between Eric Crown & Mango Research. Eric is, by far, one of the few technical traders in the space that really knows what he’s doing. He has over 10 years of experience trading traditional markets and market-making for equities.
What we like about Eric the most is that he doesn’t simply trade technicals – he trades the crowd psychology & behaviour derived from the technicals. We’re excited about this collaboration and will hope you enjoy & learn as much as I have from Eric.
Bitcoin appears to be printing a bear-flag as it continues inching toward the $3250 mark that we forecasted a few weeks ago. More importantly, for the first time in the history of Bitcoin, the monthly candle opened below the 55EMA. The response from the bulls have been weak thus far.
The descending volume further indicates that buyers aren’t willing to step in just yet. Since price action appears to be in a slow, declining consolidation, all bearish indicators discussed in our last couple of reports are still very much in play.
The report also discusses the 4 Day Death Cross and the the Volatility Index as pointed out by the Eric Crown.
Note: Our bias/opinion is always on the side of the trend – and the trend is still Bearish!
However, technical analysis on current price action proposes a case for both – Bulls & Bears
10 SMA - A Daily Harasser
BTC started the weekend strong with a rally up to the $3485 area. The move was cut short, however, as it was met with stern resistance from the daily 10 Simple Moving Average. As expected, the price quickly retreated back to the $3380 region. This has been the story for the past few weekends now: Bitcoin rallies & hopes run high, Bitcoin is met with a key daily EMA, Bitcoin retreats & hopes are crushed. This is a classic sign of bearish consolidation & distribution.
As Eric Krown has stated:
“Bitcoin is being walked down gradually toward the $3250 mark”
The rejection of the daily 10 Simple Moving Average was key. The 10 SMA has been holding down price action for over two weeks now. This indicates that the sellers are in firm control.
Break Of The Monthly 55EMA – History was made!
In our last report we discussed the grim possibility of Bitcoin closing a monthly candle under the 55 EMA. Well, that possibility has now turned into a reality. This does not bode well for Bitcoin bulls. The monthly 55EMA has proved as strong support for the preceding 3 months. We saw price get rejected every single time until its break last week.
To reiterate – February started the month with Bitcoin opening under the 55 EMA – with January closing under the 55 EMA. This clear open & close under the monthly 55 EMA is a first in Bitcoin’s history. Bears have pushed price into new territory. And buyers are seeming more hesitant than ever.
It must be noted, however, that Bitcoin is relatively young. It hasn’t had enough market cycles to test the 55 EMA before. This lack of price history should be taken into consideration before placing weight on this forecast.
A retest of the 55 EMA in the month of February should not be discounted either. The 55 EMA currently sits at the $3674. A retest and rejection of this region will further strengthen our bearish bias.
Major moves are what gives us a broader perspective on overall market sentiment and expectations. However, it's the minor/intermediate moves that will help us make informed technical forecasts. And so far we have 3 moves still in play suggesting incoming support.
Inching toward the $3250 Mark
In the last few reports we emphasized that multiple signs point to the $3250 mark. As of now, nothing has changed. There has been far too much confluence to suggest otherwise, namely:
The Symmetrical Triangle
Double-Top Murder Formation
Weekly 200 SMA
We’ve discussed the symmetrical triangle and the double-top formation in greater length in the previous reports. As long as we respect the $3750 region – both of those patterns are still in play. And both of them have a measured move to the $3250 mark.
For now, however, our most immediate (or closer) concern is the 200 MA which is drawing the perimeter for the $3250 target.
Weekly 200 MA
The 200 MA that proved as major support back in December at $3100-$3200 region as well – confluencing with both measured moves. The first bounce off the 200MA back marked BTC’s local bottom on the weekly chart, confirming it as key support.
This 200 Weekly is a major EMA that has a lot of eyes on it. And the more eyes you have on a support/resistance line, the stronger it is likely to be. Bitcoin has been ranging between this 200 SMA and the 200 EMA. A break of either one of these will likely lead to a bigger move.
We’ve tested the 200 EMA a couple of times already – and it’s proven itself as strong resistance. As we inch toward it gradually, we are leaning stronger and stronger toward this breaking.
Note: The 200MA has creeped up since the last test in December where it was sitting at $3100 level. As things stand, the 200MA is currently sitting at $3298.5 (Bitstamp).
However, it is extremely important that we wait for a confirmation before making any major trade decision. As Krown has stated himself:
“There’s more pressure to the downside than not – however, I’m going to wait for a daily break of the $3250 or the weekly close under the 200 Simple Moving Average”
BTC has been consolidating between the weekly 200 EMA and 200 MA for over 2 months now. This consolidation has brought btc to a state of decreasing volatility.
Krown observed that low volatility was frequently followed with a sudden price move leading to high volatility. While this may not be a definite play, it is a highly probable one based on historical data.
Question is, are we expecting a price move to the upside, or the downside? Well, given recent price action, there’s a stronger bear case than a bull case.
4 Day Death-Cross
The last 4-day candle close marked a fresh 55-200 EMA death-cross. A death cross suggests a potential major sell-off incoming. This is the second 4-day death-cross in BTCs chart history. The death cross may be a reliable indicator in forecasting a major sell-off in traditional and crypto markets.
However, it may be prudent to further strengthen a bearish analysis with another suggestive bearish indicator. Death-crosses make for good BTC price forecasts on lower time-frames. However, this may not hold true for higher time-frames given BTC lack of price history.
Ethereum: Resolution On The Measured Move
Last week we left off with Ethereum getting rejected at the Head & Shoulder (top) neckline. only to form a bearish descending triangle. Ethereum soon after made an announcement of postponing their much anticipated Constantinople hard-fork. Although Ethereum was already forming a bearish pattern, the announcement only helped fuel bearish sentiment.
This resulted in the break of the descending triangle on January 27th. The break-down of the descending triangle had a forecasted measured move of $99 (approx.
As Ethereum’s price action unfolded after the release of our last report, the forecasted measured move was indeed hit – albeit with a slight front-run. Ethereum wicked its way down to $100.9 and closed at $102.92.
For now, Ethereum is acting much like Bitcoin: bearish consolidation. Price action looks to be limping along and we are expecting a resolution on this consolidation very soon as well.
Weekly Bitcoin Price Prediction: Summary
Overall – our sentiment leans strongly to the down side. As mentioned, Bitcoin is currently in a bearish consolidation and Ethereum is following suite. All signs point to at least $3250, but the question remains as to whether or not we make a nose-dive right past it.
Price seems to be inching closer and closer toward the 200 SMA on the weekly (currently at $3300) as volatility pressure builds up. Multiple indicators point toward an explosive move. Will the explosive move be a break? Or a bounce? A break points toward lows of $2400 - $2600. A bounce may take us all the way back up to the $3800 region. However, as indicative in this report – we lean to the downside.
We’ll have a more concrete opinion as price action develops. So stay tuned for the next report!
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