Since my last technical review of Bitcoin
In 2018 I analyzed the NYSE Bitcoin Index ($NYXBT) as I was stimulated in part after reading a projection in March 2018 that it would rise from around $8,500 to $30,000 by the end of 2018. The extreme nature of this projection I felt required more research.
I have found pivot analysis to be a useful tool when applied to a wide range of financial markets. It provides important input for my analysis of both the long and short-term trends. In the past, I have written about yearly, quarterly and monthly pivot analysis.
The pivot values are derived from this formula and are based on the prior time periods. For example, the yearly pivots for 2022 are based on the high, low and closing levels in 2021. Monthly pivots are determined by the prior month’s price history.
On a simplistic level if prices are above the pivot it indicates a positive trend with targets at the R1 and R2 resistance levels. If prices close below the pivot it indicates a negative trend with potential targets at the S1 and S2 levels. The negative trend is only reversed by a move back above the pivot.
Let’s look at the 2018 analysis in terms of yearly pivots as $NYXBT closed below the 2018 yearly pivot at 11,368 the week ending January 22, 2018, point b. This was a negative sign for the major trend.
In 2018, my analysis indicated a key level of Fibonacci support was at $7,376, line a that was violated a week after the article was posted. This targeted the support at $4874. The yearly S1 was at 3939. For the next seven months, NYXBT continued to drift lower as in early December 2018 the NYSE Bitcoin Index had a low of $3251, point c.
On Friday, April 29th 2022 I saw the headline “Experts Say Bitcoin Could Hit $100,000 …” so in my view this warranted a new technical appraisal. This weekly chart of the BTCUSD indicates it closed the year at $46,471. The yearly pivot level for 2022 is $48,259, based on the high, low, and closing levels in 2021. Therefore BTCUSD started 2022 below the yearly pivot. This was then a key level of resistance.
BTCUSD made a low on January 24th at $32,990 and then started a rebound. On March 24th BTCUSD peaked with a high at $48,208, which was below the yearly pivot, and then closed the day at $47,128. The rally had stopped below the former uptrend, line b, which had become resistance. In technical analysis when a resistance level is overcome it then becomes support and conversely if a support level is broken it then becomes resistance.
The weekly chart shows a shallow uptrend, line c, and a weekly close below $34,349 would be a sign that the downtrend had resumed. From May through July of 2021 BTCUSD had lows ranging from $28,908 and $29,320 which is now chart support. The 1st level of yearly pivot support (S1) is at $27,540 which is also a potential downside target.
The MACD-Histogram or MACD-His I have found to be an excellent momentum indicator, especially when used on weekly data. As BTCUSD was peaking in November of 2021 at $68,978 and forming higher highs, line a, the MACD-His was giving a different picture. The MACD-His had formed sharply lower highs, line d, that was consistent with a top as momentum was slowing as prices moved higher. This is known as a bearish or negative divergence.
The MACD-His dropped below the zero level four weeks later on November 29th, 2021 which was a sign of weakness. The MACD-His did manage to turn positive after the ten-week rally from the early 2022 lows. It only stayed positive for two weeks as the rally peaked in March (point b) as the MACD-His turned negative once more. A weak buy signal typically warns of a further decline.
The chart and technical studies do favor further weakness in BTCUSD during 2022. It would require a weekly close above the yearly pivot at $48,259 to change the trend. I will be updating this analysis if key levels of support or resistance are overcome.