Bitcoin price continues to consolidate near $280 in the absence of any positive trigger. Even though the price structure for the past week has been that of higher-top, higher-bottom, there are several parameters pointing towards a correction.
A thorough technical analysis on the 4-hour price chart of BTC/USD reveals some very important trading considerations:
- Bitcoin value has shot up from $236 to $292 since 27th February, following a textbook bullish price structure, but the Relative Strength Index (RSI) readings have failed to complement the exuberant mood. A clear case for this can be made by looking at the yellow rectangles in the chart above, which signify that even as the price continues to head higher, the strength is weakening. This is a warning sign and a continuous decline in relative strength amid rising prices is a “red flag” to exit the digital currency.
- The price is consolidating near the upper end of the Bollinger bands, which generally act as strong resistance levels. According to the chart above, the Bollinger band resistance level comes at around $290 and hence, traders can consider booking partial profits in their long positions.
- The Moving Average Convergence Divergence (MACD) indicator also tells of fatigue. In the past 24 hours, the histogram value has declined from 2.29 to 0.3815. A declining histogram value is a sign of weakness and a dip into the negative territory would further validate the underlying bearishness.
- However, the cryptocurrency has formed a strong base around the $240-mark, which is also achieved from the upward sloping support line. Hence, any correction to this level should be viewed as a buying opportunity.
Each Bitcoin is currently valued at $280 and given the inherent volatility of the cryptocurrency, traders and investors are advised to take the above factors before initiating investments.
Charts from Bitfinex