Daily Technical Analysis | Bitcoin | 2/12/2018

Bitcoin Stabilizes as Prices Bounce From Oversold Territory

Bitcoin prices moved higher on Wednesday, bouncing from oversold territory and poised to test short-term resistance near the 10-day moving average at 8,982.  A close above the 10-day moving average would lead to a test of the 38% Fibonacci retracement of the decline from the highs made in December above 19K to the recent lows in February. This retracement resistance level comes in at 11,356. Support is seen near the February lows at 5,873 and then the November lows 5,511.

Negative Momentum is Decelerating

Negative momentum is decelerating as the MACD (moving average convergence divergence), which is a momentum indicator, is printing in the red, but the MACD histogram has a positive trajectory which reflects consolidation.  The MACD generated a crossover sell signal in late January and continued to express accelerating negative momentum until Wednesday.

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The RSI Generates a Buy Signal

The RSI (relative strength index) which is a momentum oscillator, that measures accelerating and decelerating momentum, bounced from oversold territory.  Reading on the RSI below 30 are considered oversold, and when prices move from below oversold levels and bounce, it can be considered a buy signal.  Bitcoin prices have been oversold according to the RSI, twice in the past 7-months and in each of those cases, bitcoin rallied from those levels.

Volume Hits a Three Month High

Bitcoin volume hit a fresh 3-month high on Monday, which is a sign of a long liquidation.  The reversal in prices following robust volume, means that the weak hands have now been flushed from the market.  Prices should bounce from support on soft volume, but on a break of support volume should accelerate if a strong rebound is intact.

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