Extended bullish divergences continue to print on monthly and weekly charts
December is going to close slightly below where it opened – that’s 5 consecutive months down – we haven’t seen a green close on a monthly chart since July of 2018. But the volume for December is the big deal.
Bullish or Bearish?
There are a number of conflicting signals regarding Bitcoin’s current price action. While there has been significant upside during the last half of December, the last week has been all downside. From the bullish standpoint, there appears to be a clear bullish flag coming off the swing low of 3135 on December 14th to the swing high of 4239 on December 24th. Prices have been trading between the 0.382 and the 0.618 Fibonacci retracement levels of that swing. There also appears to be an inverse head and shoulders pattern that could be forming, but the confirmation of this pattern has yet to be confirmed. Remember: any head and shoulders pattern (regular or inverse) can only be complete after the neckline has been broken. In order for this event to take place, prices would need to break above and hold above the 4239-price level. On the bearish side of things, we could be looking at a mere basing pattern or a consolidating pattern before another move lower.
At the time of writing this article, Bitcoin was trading at 3681, which is shy of the December open at 3944.69. If Bitcoin can close above the open for the month, that would be the first green monthly candlestick since July. If it can’t close above the open, it will represent the fifth consecutive month lower. November of 2018 was an ugly one for bulls. In fact, if we were to disregard the beginning of trading in Bitcoin’s history, November of 2018 was the single most violent and ugly bear move in its history. While the percentage move from the high to low of November was not out of the ordinary, the percentage move from the open to the close was the largest down move. The volume was also significant, with November’s volume representing 6th highest volume month, but the highest volume month since April and more than twice the monthly volume of September and three times the volume of October.
While December looks to close as the 5th consecutive month lower, it’s well of the lows of the month and not far from the open, certainly a smaller trading range compared to November. The volume though is the bigger than Novembers and the highest volume over the past 7 months. The monthly RSI is showing some evidence of hidden divergence, both very powerful on the monthly charts. First, there is a monthly divergence between price and the RSI that extends back to January of 2015 to December of 2018. There is also a lengthy divergence between price and the Composite Index that extends back to October of 2014. In the near term, there is regular bullish divergence on the monthly chart that goes from September of 2018 to December of 2018 – this divergence is even more noticeable on the weekly charts.