I have to start by saying that I am very impressed with the run bitcoin has been on since July 21st. We did get a small pullback creating a higher low as I said I hoped we would, and bitcoin has now just pushed back up into the distribution zone. All of this is very good to see but I am still not convinced that this is the beginning of a new bull market. I am still treating it like just another bear market bounce like we have seen from bitcoin many times before.
Bitcoin Daily Chart
Looking at the daily chart you can see that bitcoin did pullback after a very nice run higher that resulted in the price becoming quite extended above the moving averages. As a result of being overextended, bitcoin did need to rest or pull back to the moving averages which it did but as I had hoped it was a shallow pullback that created a higher low. Following the pullback bitcoin did bounce back quickly, creating a new local high and actually topping all of the highs going back to mid-May.
Another positive development is that bitcoin did manage to break through the bottom of the distribution zone that it had previously been rejected from. I also like how all of the moving averages have curved and now have an upward slope. We should also see a golden cross form relatively soon if bitcoin can continue to push higher. A golden cross is a bullish sign and occurs when the 50 day EMA (green) crosses back above the 200 day EMA (purple).
Now that bitcoin has pushed back up into the distribution zone what I will be watching for is to see if bitcoin can stay up there and also if the price can continue to push higher.
Bitcoin Weekly Chart
You can see looking at the weekly chart that bitcoin has had 3 strong weeks in a row. Bitcoin is above all of the moving averages and they all have a positive slope. That is positive for now but as I said above I am still treating this move higher as just a bear market bounce. Another positive thing I was going to say is that the nine weeks of sideways price action following the drop from the highs in late April was unusual if bitcoin had indeed topped and entered a bear market. Looking back at the 2018 bear market drop from the December 2017 peak there were quite a few bounces but they were all "V" shaped quick bounces.
After doing some more searching though I did find a period after the 2013 bull market peak where bitcoins price action moved sideways in a similar pattern then bounced about 60% before rolling over and heading lower again.
Bitcoin 2013 to 2015 Weekly Chart
So, I can't really say that this sideways price action is unusual. If we follow the pattern from the 2014 bear market I would expect bitcoin to peak any time between where it is now and about $48k then roll over and head slowly down to new lows.
Another negative thing that I don't like is how it looks as though bitcoin is forming a descending triangle.
Bitcoin Daily Chart (200 SMA Added)
I also wanted to include this daily chart in which I have added the 200 simple moving average. As you can see bitcoin has bumped up against it and for now, pulled back. We'll have to see if bitcoin has the strength to push past it or if this resistance proves to be too much and this is where bitcoin reverses.
I'll say it again, I would love for this to be the start of a new bull market but I can't help having my doubts. Even though I do have my doubts I am still playing these bounces and I am currently sitting at 70% crypto and 30% cash. I am watching very closely for signs of weakness and also have pretty tight stops set just in case.
I realize comparing the price action now to that in 2014 might not be legitimate due to the vast differences in the investor demographics so we'll just have to wait to see how it plays out.
That's all I've got for now.
Stay safe and protect your capital!