Bitcoin and Ethereum – The drop before the pop?
Bitcoin just closed out last week with the lowest volume in 2-years. Well, that’s depending on the exchange data you see/read. Fast forward to today, we see we have the biggest move and volume in two-weeks, but we still remain above key support zones. So the question is: Is this the pop before the drop?
Bitcoin drops, remains above long and short-term uptrend lines
Depending on the exchange data you read, the prior week saw the lowest volume week in Bitcoin in 2-years. Additionally, it was the tightest percentage range traded in over two years as well. Monday saw a return to volatility and volume with a fairly one-sided trade for the majority of the trading day. At the time of writing this article, Bitcoin fell from the daily high of 6414.99 to the two-week low of 6211. The volume thus far has been almost triple Sunday’s volume and it appears that Monday’s daily volume will exceed the 20-day average. Price remains above two key and major support lines. The longest and most important is the bullish trendline that extends from the swing low of 900 on April 15th, 2017 to the next higher low of 1758.20 on July 17th. The support line for this line is at 6147. The next supportive trend line connects the 2018 low of 5790.01 on June 18th to the next higher low of 5900 on August 14th. While the weekly and daily charts show very neutral conditions in the RSI and the Composite Index, the monthly charts show a bullish divergence between the RSI and Composite Index. In fact, the Composite Index shows a very bullish looking reading on the monthly chart as the Composite Index is coming off of all-time lows on the monthly chart.
Ethereum showing a big fake-out? Key support trendline remains below
The ‘little brother’ to Bitcoin, Ethereum, also shows strong selling pressure throughout the day. However, there is a possible deeper and immediate bearish setup on Ethereum’s chart. The daily chart for Ethereum shows a clear break of a strong triangle pattern. This occurred on the exact halfway point of the current Law of Vibration cycle. While this triangle has been broken and may very well close below that triangle, there is a strong supportive trend line below at 172.77. The 1/8th Major Harmonic of 181.38. However, this pattern appears to be very indicative of a ‘fake out’ or a ‘bear trap’. Ethereum is currently trading within Gann’s 270-day cycle. The 270-day cycle is part of the 90-degree cycles that described as the most powerful divisions of a one-year cycle. The 270-day cycle has a high probability of support and/or resistance being found around the end of this cycle. Gann wrote that the 270-degree cycle could set up a 90-day reversal cycle to end the year. Given that the current halfway point of this Law of Vibration cycle is also within the 270-day cycle, I would anticipate a fake out trade lower before price move higher. It would be the proverbial ‘drop before the pop’ scenario.