Bitcoin Price Analysis: June 5, 2018
This article will be very technically-based. I’ll be writing from the assumption that readers will be familiar with at least the basics of trading and charts. However, even if you’re a beginner, I found early when I started trading that reading the analysis of more expert traders helped me become more familiar with the key concepts, especially the vocabulary.
Disclaimer: This is not financial advice. I’m just interpreting what I see going on in the charts based on the last few weeks.
I’ll be charting based on Binance’s Bitcoin-US Dollar pairing. This is because they had the most volume over the last 24 hours. Before I chart any coins I’ll go to coinmarketcap.com to see which exchange had the most volume. More volume means more liquidity which means there’s more buyers and sellers transacting and that generally results in price moving in smaller increments.
200 Day Moving Average
We’ll start off by examining the 200 day moving average. The lime green line in the photo below is known as the 200 MA. This is simply the average price of a bitcoin based on the average of the price over the last 200 days. Some people use the 50 moving average; others use the 100 day. In general, the longer the duration, the more reliable it is an indicator.
As you can see from the highlighted circles, the price has bounced off the moving average three times! This mean that the 200 moving average line is a major area of resistance. It’s going to take a lot of buying power for the price to close above that moving average line which many will consider a good sign.
One of my favorite tools for trading is the Fibonacci retracement. You may have heard of Fibonacci and his famous ratios (1+1=2, 2+1=3, 3+1=5). I won’t go into much detail on how it works as there’s plenty of material online, but what I like about it is that it helps me set targets and areas of resistance.
As you can see in the picture, there were two strong trends: up and down. In an upward trend you draw the fibonacci from the bottom of the trend ($6656) to the top of the trend ($10,020). The tool will then give you different price points that the price may bounce off of or hit resistance.
The .618 level ($7941) is considered the golden number. As you can see, the price bounced off the .618 level nearly 9% before dumping again. This simply means there were not enough buyers to keep the momentum going and the price began dropping as supply outweighed demand. For the moment it seems that the .786 level is holding for now. Time will tell.
I saved the ichimoku indicator for last because while it may seem complicated, it’s relatively simple. The name is Japanese for “one look equilibrium chart”. One look should give you an idea of the trend and where equlibrium is.
The clouds you see are known as kumo clouds; The red line is known as the kijun; and the blue line is known as the tenken. When these two lines cross, it’s known as a tk crossover. To keep it simple, when the blue line crosses the red line = bad sign; when the red goes under the blue = good sign.
When the red line crossed the blue line on April 19th, the price went up. When the blue line crossed the red line on May 14th, the price went further down. That’s because these crossovers signal to traders a good entry and exit. This indicator does not give you the perfect buy or sell signal but it captures most of the trend which makes it a favorite amongst experience traders.
The color of the kumo cloud gives you an idea of the “health” of the price. Green is good, red is bad, and as you can see on the chart, there is a red cloud ahead which means there may be more downward action ahead. What we want to see is the price breakthrough the cloud and begin moving upward.
In conclusion, things are not looking very good at the moment. Best case secnario the price hangs around in the $7,400 level before making another attempt to move up. However, my gut tells me we’ll see another drop to $7,000 and possibly below in the following days. Happy trading!