Market Analysis

Bitcoin Price Analysis: Weekly Consolidation Hints Toward Sustained Breakout

from The Bitcoin News 5 years ago 0 0 728

Another week has passed as bitcoin continues to coil in a tighter and tighter consolidation. Both price and volume continue to consolidate as bitcoin decides where the next major move will be. A trend of higher lows and lower highs shows a balance of both supply and demand, but ultimately one will win out:

Another week has passed as bitcoin continues to coil in a tighter and tighter consolidation. Both price and volume continue to consolidate as bitcoin decides where the next major move will be. A trend of higher lows and lower highs shows a balance of both supply and demand, but ultimately one will win out:

To gain a perspective of *just* how tightly wound the market is, a great tool analysts often use are Bollinger Bands (bbands). Bbands are a visual representation of forecasted volatility. If the bands are squeezing, there is a forecast for increased volatility in the future. Conversely, if the bands have already expanded and are beginning to round/bulge, there is a forecast for decreased volatility. In our case, on the weekly candles, the bands are squeezing tighter than they have in several years:

During the bull run, we could see a very clear trend of support being found on the bband midline for several years. However, at the beginning of our bear market, the midline has continuously proven itself to become resistant to every single rally over the last few months. However, as the price begins to consolidate further and further, the midline has drawn itself within striking distance, while the price trend has established a series of higher lows.

Even though a breakout has yet to happen, there are some early signs we can keep an eye out for, using the weekly Bollinger bands. I believe this next move will be a strong, sustained move that will paint the course of the market for months to come.

It’s very easy to get lost in the weeds while trading bitcoin because it is so volatile on low timeframes, but if you look at the bigger picture on daily and weekly candles, we can see the strength of the trend.

One early sign of a directional breakout is when the bbands begin to expand again. As I stated earlier, bbands are a visual representation of consolidation and can forecast volatility. If the bbands begin to expand, that is an indication that the volatility has chosen a direction and will likely continue in that direction until the bbands round/bulge — thus indicating a forecast for decreased volatility until it consolidates once again.

An early sign of a bullish trend reversal will be on the close of the weekly candle. If bitcoin can manage to close above the weekly midline, that will be a sign that we have broken resistance.

However, it’s important to note that just because we close above the midline doesn’t mean we *must* continue. The next candle (the one following the candle close above the midline) will give us more information. If we can establish two consecutive candles closing above the weekly midline, this will be a definite change of character for our trend as we have yet to see two consecutive closes above the midline:

Trading and investing in digital assets like bitcoin and ether is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on Bitcoin Magazine and BTC Media related sites do not necessarily reflect the opinion of BTC Media and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.

This article originally appeared on Bitcoin Magazine.