Bitcoin Works Off Oversold Position and People are Calling Bottoms?
I'm going to let you in on a simple little trick for gauging when an cryptocurrency is overbought or oversold. It is not rocket science and is a tool that has stopped me from chasing coins up or down.
10 Day Moving Average
Yep - just a simple little moving average is my quick reference guide to whether a coin is overextended on the up or down side and causes me to be patient.
It also gives me a target for a coin to revert back to after a large selloff, like the one we just had in bitcoin.
Two things can happen:
- The coin trades sideways while the moving average catches up
- The coin rallies a bit to meet the moving average that is coming down
Now look at the daily chart of Bitcoin...
After the large selloff we've had a handful of modest up days capped today's larger up move. This took us right back to the 10 day moving average.
Excited over the Expected?
In my opinion I expect a reversion back to the MA, it nearly always happens so it's not something to be excited about - it is something that puts us in a position to see what happens next.
However, there are fund managers and other crypto talking heads calling this the bottom. I certainly hope they are right, it is the third time BTC got into the low 6K area and bounced so there is reason for hope, but here are my near term thoughts...
There are a number of scenarios that can play out:
- BTC price hits its head on the 10 MA and turns back down
- BTC rumbles around these prices and the MA turns flat and then higher
- BTC just rips on past the MA and the MA makes ahard u-turn
Given the market environment the past two months it is very hard to be gung ho about option three. One and two have the higher probability and I think the second, rumble around and consolidating in this area would be most constructive for price.
But hey, that is just my opinion. In the end BTC needs to re-establish above that 6,800 price for it to see substantial upside.
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Disclaimer: All info in this post is my opinion and for informational purposes only
Free e-book: ScaredyCatGuide to Knowing What the Heck Bitcoin Is
Disclaimer: All info in this post is my opinion and for informational purposes only
Here's to hoping Bitcoin is on it's way back above $6800, so that Steem and SBD can also go back up !
Yes, unfortunately the alts are still drastically influenced by the price action of BTC. Can't wait for the day steem breaks away on its own!
The more times we test support the more likely it will fail. You mentioned we hit support 3 times already which is not a good sign for bulls. I agree at present time doubtful btc price can move up from here. Hoping for the best. Thanks.
Yes, at this point if we come back down near 6k again I'd be very concerned.
Hopefully! I wish I could buy in more! Investing in the long run helps with these short term scares. What a roller coaster!
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Yeah, buy low sell high is always the goal. We shall see :-)
Great post.
Short and to the core points.
So easy to hope for take off but makes sense that a "rumble around and consolidating... then higher" may be most constructive for long term price.
Thanks.
Thanks, sometimes keeping it simple is the best!
At least the bleeding has stopped for now.But I still need my nurse.
If she is going to nurse me than I can deal with the low prices haha
My sentiments also. :-)
I also hope it is the bottom but a small rally is not enough to reverse the trend for sure and the more we test $6,000, the least likely we will be able to hold although there may be some more factors behind the price support than meets the eye.
Yeah, triple bottom usually don't happen cus there is a break on the third attempt often. Maybe this constitutes a failure by the bears. I'm flipping a coin right now.
Hard to tell in this market, things seem to change drastically day by day. Good news has minimal impact while 'bad' news has a larger effect. Until we are above 8k I think we will continue to see this type of sideways trading.
I'll take sideways action above 6k all day. If you come back down to test 6k again, well odds are against us on holding up.