Updated: Sep 1, 2018
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Hello, fellow crypto enthusiasts, investors, and traders! I hope you are all having a great weekend. I know I am really looking forward to this weekend here on the Shore of Flathead Lake near Lakeside, Montana.
Anyway, this morning I just want to give a quick update on Bitcoin. After peaking at $8506 on Tuesday the price pulled back over the next three days hitting a low yesterday of just over $7815 before recovering and closing for the day at $8188 (Bitfinex prices). As you can see from the chart currently the price is sitting right between the daily 100 SMA and the 200 SMA, which look to be converging. At some point in the near future, it is very possible that the price will be squeezed as the two moving averages meet, at which point something will have to give. There have been three instances within the last five months where BTC approached the daily 200 SMA but failed to push above it. Also when BTC hit the high on Tuesday it was within $200 of the 200 SMA before backing off so you can see how the daily 200 SMA has proved to be pretty strong resistance.
I looked back through the chart to see if I could find another instance when the price was squeezed in a similar manner. I did find one instance during the 2014 correction where the shape of the daily 100 SMA and the 200 SMA looks very similar to this correction. However, there is one big difference, during the 2014 correction the price had just hit a couple of highs and was sort following the 200 SMA lower to the point where the two moving averages met and this time the price has risen from a low under the 100 SMA to push above it to the point where it sits today. During the 2014 correction, you can see that when the two moving averages did meet there was a substantial drop in the price of BTC, now at that point BTC was already in a decline that had been going on for over two months and did not end for another five months. This time we have sort of an opposite scenario where the price of BTC has been in a strong uptrend, albeit for only about two weeks now, so maybe this time we will see a pop to the upside.
I have to say that even if BTC does manage to pop higher this time above the daily 200 SMA which would be a very bullish signal it still faces a tough uphill battle to keep the momentum going. To me, it looks like there is quite a bit of resistance around the $9000 level, from about $8700 up to the $9400 level. Then even if BTC can push through that zone of resistance it will face the $10,000 level which it failed to push above the last time it approached it back in the beginning of May.
It is also very possible that before the two moving averages even have a chance to converge that the price of BTC could make a big move up above the 200 SMA or a big drop back below the 100 SMA. Either way, I think it is going to be very interesting to watch this play out.
Take Care, be patient and always protect your capital!
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