Bitcoin (BTC/USD) sees rays of hope, but storm clouds remain on the horizon

Market Commentary

While its not the worst thing in the world for the bulls that the bitcoin markets are still treading water around the 3400 $ level, its also not great considering that the double bottom we spoke about yesterday is beginning to disintegrate as price continues to move sideways over the near term thus potentially putting the kibosh on any potential rally moving forward. Granted, the possibility of a double bottom within a double bottom over the coming days is still alive which would almost certainly spark a legitimate countertrend rally, although the longer the bulls fail to act the greater the odds of a bearish consolidation are which is why we think a move must be made by the bulls by the end of the week if they want to keep hopes of 3600 $ alive.

Daily Chart

One more look at the daily chart as well this week where we can see that despite another blue reversal signal in the inner demand area yesterday, it came on yet another bearish candle formation and is once again being followed up by a red signal while market structure remains broken and heavy suggesting lower prices in the not too distant future. Also note that all of the moving averages continue to move to the downside, strong resistance is still actively building overhead, and the Ichimoku Cloud continues to grow more negative out in front of the market, so it would appear as though the bears are still in control for the time being despite the possibility of a countertrend move soon. 

Moving on to momentum and volume, notice that Willy and the Stochastic continue to tread water in officially oversold territory, RSI and MACD remain bullishly divergent, and PPO is still flashing strong buy signals, all of which are fairly encouraging for the bulls moving forward. That said, exchange volumes remain bearish, the A/D line is still under significant pressure, and the volume profile setup looks awful both above and below the market, so despite the fact that price continues to consolidate inside multiple demand area on favorable momentum oscillators (which opens the door to the possibility of a sustainable bottom being established in this region), we continue to think that the path of least resistance remains lower due to the still bearish technicals on most other timeframes which is why we'll continue to default to the downside until further notice.

Market Summary

With the technicals once again stagnating with only one more day to go until the low liquidity weekend environment takes hold, we think the bulls need to start showing some muscle now else they risk the bears coming back with a vengeance on any sign of weakness over the coming days which would likely result in a test of the 3000 - 3200 $ region on a breakdown below the short-term triangle pattern.

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