Bitcoin (BTC/USD) flatlines amidst technical uncertainty

Market Commentary

Despite the fact that the bitcoin markets did take a leg to the downside over the past 24 hours, which came as no surprise, the 3500 - 3800 $ consolidation range that we mentioned would likely stay intact for a few more days is doing exactly that on highly mixed short-term technicals and very uncertain market sentiment which is why we want to stay neutral until directionality becomes more evident upon a breakout from the range. While there are some encouraging signals emerging for the time being on the shorter-term charts which could mean a run-up to 4000 $, the medium to long term charts are still flashing caution so a move down to the previously discussed 3200 - 3400 $ area is just as likely, if not more so, before we get additional clarity regarding the bottoming process. 

6-Hour Chart

We'll take a look at the 6-hour chart today where we can see that the recent selloff sparked a bearish candle signal yesterday but it failed to reach the top of the upper demand area which ended up creating a higher low thus improving near-term market structure, all fairly good signs for the bulls moving forward. Also note that the move back above 3600 $ this morning initiated a reversal candle which is also encouraging for the bulls, however price is struggling with the still bearish EMA's which are turning the recent candle formations quite bearish so we remain skeptical of the upside potential moving forward. Adding to our skepticism are the 50 and 100 SMA's, both of which continue to steadily pick up steam to the downside, the still active dynamic resistance dots just above 4000 $, and the now bearish Ichimoku Cloud out in front of the market, so we'll stay on the sidelines until further notice.

Moving on to momentum and volume, notice that RSI continues to tread water in no man's land, the Stochastic is currently stabilizing but still has some recharging to do, MACD is close to recrossing its zeroline back to the downside, and PPO is firmly neutral for the time being, none of which is all that helpful with near-term directionality. Additionally, exchange volumes remain mixed in general and the A/D line continues to move sideways, which increase the probability of a consolidation continuation through this week, although the volume profile setup is far thinner below the market than above it, particularly around 3300 $, which is why we still think there is a slightly better chance at a break to the downside than an upside resolution out of the 3500 - 3800 $ range.

Market Summary

Given the price action we've seen over the past few days in conjunction with the highly uncertain technicals discussed above, we continue to think that this period feels similar to the consolidation around 6000 $ that ultimately ended in disaster for the bulls, which makes us worried as the current seasonally weak period persists through January. While this does imply that the bulls will be able to defend 3122 $ for a while longer, it also suggests that 3122 $ will not hold as the cycle low which opens the door to significantly lower prices down in the LT ProTrade entry area. While this is still not our preferred scenario right now, we are open to the possibility which is keeping us very cautious moving forward. 

 

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