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Friday Inferno market update

Friday Inferno market update

Analysis

TL;DR Some very bullish moves. Will it end, and if so, where?

 

Bitcoin has staged an impressive recovery since it touched yearly lows. BTC briefly dropped below the 200 weekly moving average but recovered fast. It has not fallen substantially below the 200 WMA since capitulation in January 2015. This time, we saw a $3,122 bottom, and the week closed pretty much on that line, just below $3,200.

 

Then went on a tear, ultimately hitting $4,172 – a boost of 30% from the bottom. It broke multiple resistance zones, pushing through areas that might otherwise have proven tough to break. Since the bottom, we have seen five consecutive daily green candles. Moreover, volumes are coming back in after a decline.

 

So, what next?

 

It’s possible that bitcoin will continue to soar, staging another move up towards $5k. We might expect resistance at $5,200 or so if that happens. But right now, indecision characterises the market. So far, we haven’t managed to break strong resistance at $4,250. We have seen multiple doji candles on the 4-hour chart, with wicks both up and down: traders just cannot decide whether this is the start of something bigger, or too good to be true.

 

We see several reasons for the spectacular recovery from $3,100:

  • After such a dramatic fall from $6,000, a bounce was in order sooner or later.
  • The 200 WMA, broadly coinciding with $3,000 support, provided a good last stand and a reason to stage that recovery.
  • The ‘Santa Rally’: many traders will be covering their shorts so they can ignore the charts over Christmas. This effectively involves buying back BTC to close their positions.
  • There was increasing talk of incoming capitulation on Crypto Twitter, with ‘dumb money’ making assumptions of further falls to come. The nature of the market is to destroy such traders, doing exactly what the majority thinks won’t happen.

 

The alts, too, are seeing some serious green, particularly WAVES, which has hit almost $5 from its base at just over $1 a few weeks back. BCH almost tripled in price in just days.

Trading is incredibly high-risk right now. Those devastating falls over recent weeks have been matched by jaw-dropping rallies in recent days. We will see further falls – there is no doubt about that. Just as a correction from the freefall was in order, so is a correction from this bounce. It’s unknowable when that will happen, or where it will end. Whether BTC will drop below the 200 WMA, or whether it will bounce off support (perhaps at $3,600) and the rally will continue afterwards and attack $5k and then that all-important $6k line. It’s too early to say. But volatility is the name of the game, one way or another.

 

Stay safe, and happy Christmas guys!

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