BTC/USD: Technical Outlook, Edition #2 (25/05/21)

Bitcoin is finally experiencing a relief rally after weeks of coordinated FUD (Fear, Uncertainty, and Doubt). Thank you, Elon, now please act responsibly given the weight of your breath in this market…

On-chain analysis suggests that BTC whales have also been dip buying as their respective wallet holdings have increased. (You can read our on-chain analysis here: https://research.qluster.co/p/btcusd-on-chain-outlook-edition-1)

The elephant in the room is our daily (1D) 200EMA (exponential moving average) which is typically associated with bearish price action if it is above current price – and it is hovering just around 40K USD.

A macro view reveals an enormous head and shoulders pattern forming (bearish), buyers and sellers can be seen currently sculpting the right shoulder which is about two – three weeks away from completing.

The head and shoulders pattern are the least likely to follow through given all the patterns in the wonderful book of Technical Analysis. However, that does not mean it should be taken lightly with a near 40% success rate of breaking down.

If Mark Douglas has taught us anything, it is that you will see the same trading patterns and formations over and over, but every outcome is different.

Upon closer inspection, this breakout can be seen stalling around 40K, no doubt because of the 1D 200EMA lingering above and expectations of a head and shoulders break down. 

If a breakdown does occur from here, then this recent rally was just a dead cat bounce due to seller exhaustion. 

The plan is to squeeze the bears selling low by grabbing liquidity higher (40K-41K USD) before filling up new shorts and pushing price down again. 

Keep an eye on the macro .618 fib level at 27K USD. That is where smart money would be setting some lowball bids on Bitcoin should it experience another sell off. 

Overview: Slight bearish bias – Huge head and shoulders forming, and price is yet to successfully flip the 1D 200EMA from resistance into support. If that occurs, we will re-evaluate our expectations for Bitcoin and consider going bullish. 

Stay tuned for the next update.

- q

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