Bitcoin has generated significant activity during the month of November. Sentiment has continued to be ugly for the entire cryptomarket and this has been reflected in the price action. Traders and investors have observed Bitcoin trade from the November monthly high of 6540 made on November 7th to the monthly November low of 3456.78 on November 25th. That move represents a -47% loss for Bitcoin. Surprisingly, that percentage down move is actually quite normal for Bitcoin during 2018. If we compare the major swings in prior 2018 monthly swing highs to swing lows, we get the following results:
January 2018: Swing high 17178, swing low 9005, -47.58%
February 2018: Swing high 1411775, swing low 5873, -50.12%
March 2018: Swing high 11645.74, swing low 6600, -43.33%
November 2018: Swing high 6540, swing low 3456.78, -47.14%
The moves Bitcoin have made during November are certainly significant, especially when compared to prior months. Volume is already more than double all of October’s trading volume, it is also the fourth highest volume month of 2018, more importantly, it is the highest volume month since April.
What is very telling is the conditions of the RSI. When looking at Coinbase’s data, Bitcoin has only ever traded below 30 on the RSI (30 is the default ‘oversold’ condition) on four occasions with all of those occasions displaying strong reversals on the RSI, never staying below 30 for more than one to two trading days. The most recent price action has shown a demonstrably different behavior. The RSI level for Bitcoin has stayed below the 30 level from November 13th to November 27th – two weeks in the oversold to extreme oversold conditions. In fact, according to Coinbase’s data, the all-time low RSI reading for Bitcoin on a daily chart was just hit on November 20th (reached 9.4913). The Composite Index also printed a new all-time low on the daily chart. I should note that the RSI and Composite Index have a shared relationship – the Composite Index, created by Constance Brown, is the RSI with a momentum indicator in the calculation. The RSI is a bounded oscillator that only prints between the numbers 0 through 100, while the Composite Index is an unbounded oscillator that can move below 0 and above 100.
Another piece of analysis pointing to a probable reversal is a look at the behavior of price when using Bollinger Bands. Price is not longer closing below or on the lower Bollinger Band and has instead formed a series of wicks on the daily candlesticks which have touched and pierce the lower Bollinger Band, but the close of the four trading days have all been inside, this is an imminent warning of a change in direction where price will most certainly move to test at least the 20-day moving average (the default Bollinger Band midline level).