The Missing Ingredient From A Full On Bitcoin Reversal

Tony "The Bull" Severino

1 year ago

3 mins read

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Bitcoin price is back around $35,000 and has failed to retake $40,000 despite several low timeframe reversal signals building.

When looking back at past breakdowns following significant rallies, there could be a missing ingredient needed for a full on reversal, and it could have to do with the Bollinger Bands.

All About The Bollinger Bands And How To Use Them Effectively

The Bollinger Bands are named after the tool’s creator, John Bollinger. The tool has a variety of use cases as it applies to technical analysis, but is most notably used for measuring volatility. When the two outer bands – standard deviations of a simple moving average – begin to contract and tighten, it signals a massive release of energy is coming soon enough.

When the outer bands do expand, they also act as support or resistance, and the middle-SMA does the same. The middle-SMA can also be used reliably as a buy or sell signal when price action closes through it.

But it is that support and resistance that the outer bands often supply that might be crucial to forming a proper Bitcoin bottom and one that holds for new highs.

Bitcoin price action might require a touch of the lower BB as it has during past bear phases | Source: BTCUSD on TradingView.com

Why Bitcoin Price Action Might Need The Momentum Of The Lower Band

In the chart above, a touch of the upper band after “riding the bands” to new local highs has always resulted in a short-term top. Crossing through the middle-SMA from there switches from bull to bear market, and the downtrend doesn’t end until the bottom Bollinger Band it tapped.

The 2017 bull market peak resulted in a sharp selloff, but then price action hung around the middle band for nearly a year before the deep plunge in late November 2018. From there, Bitcoin “rode the bands” again but this time on the way down.

When the middle-SMA was finally reclaimed, the top cryptocurrency shot right back to $14,000 and hit the upper band once again. Losing the middle-SMA once again started a bearish phase. A bull run likely would have blossomed sooner but COVID had other plans, and after Black Thursday instead the buy signal stuck.

From there, Bitcoin rocketed to above $60,000 where the current all-time high now set. Bitcoin price is once again simply hanging around and might need to touch the lower Bollinger Band to gain enough momentum to push through resistance and reclaim highs.

As history has shown, however, getting back above that middle-SMA means a lot, and is the first step toward bulls restarting the rally again.

Featured image from iStockPhoto, Charts from TradingView.com

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

Beyond his role at NewsBTC, Tony is the visionary founder of CoinChartist.io, an educational platform aimed at demystifying the nuances of cryptocurrency trading. CoinChartist.io serves as a valuable resource for traders seeking to enhance their technical analysis skills. The platform offers a range of learning tools and resources designed to empower traders with the knowledge to make informed trading decisions.

In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

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Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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