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Chart Of The Day: Why Bitcoin's Rally Won't Last

By Investing.com (Pinchas Cohen/Investing.com)CryptocurrencyJul 22, 2021 09:25AM ET
www.investing.com/analysis/chart-of-the-day-why-bitcoins-rally-wont-last-200592942
Chart Of The Day: Why Bitcoin's Rally Won't Last
By Investing.com (Pinchas Cohen/Investing.com)   |  Jul 22, 2021 09:25AM ET
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Since mid-March, Bitcoin, the largest cryptocurrency by market cap, has been in a serious slump. However, recently the digital token appears to have recovered, having received a much needed boost from a variety of fundamental influencers.

On Wednesday, Tesla (NASDAQ:TSLA) CEO Elon Musk, who famously declared earlier this year the EV manufacturer would accept BTC in payment for the company's vehicles, then walked that back in May, just flip-flopped again. Yesterday, at an event hosted by the Crypto Council for Innovation, he hinted that his Palo Alto, California-based company might be rethinking its policy on Bitcoin as a payment option.

At the same event, Cathie Wood, head of ARK Investment Management, defended Bitcoin as an inflation hedge during a panel discussion that also featured Jack Dorsey, CEO of Twitter (NYSE:TWTR) and Square (NYSE:SQ), defending the cryptocurrency as well.

Bloomberg also weighed in, citing a technical signal as reason to be bullish on the Bitcoin rally. The news right now may be supportive of Bitcoin, but we're bearish. Here's why:

BTC/USD Daily
BTC/USD Daily

BTC/USD price found support at the January low, the $29,000 level we’ve been tracking, having reported it it as our line-in-the sand. As we've previously said, if crossed, we’d turn decidedly bearish on the digital currency, since at that point there's no safety net of support remaining till quite a significant level lower.

In fact, though the digital token just passed $32K at time of writing, we consider yesterday’s surge to be simply a return move retesting the descending triangle. That's a pattern that demonstrates sellers are gaining on buyers.

Once the bottom gives way, it’s a signal that all demand has been overcome by panicked—and short—sellers. That move will presumably trigger long stop losses and prompt a new wave of short selling, pushing the price violently downward.

The descending triangle placement within the supply-demand chart is telling. It's positioned right below a H&S top, forced down by a Death Cross, when the 50 DMA fell through the 200 DMA.

Since then, the 100 DMA was dragged below the 200 DMA, forming a triple bearish pattern—each MA is positioned below a longer one. This demonstrates that prices are not merely falling in a narrow period but rather descending across multiple average comparisons.

A downside breakout of the triangle, completing the bearish structure, would obliterate the January low, before heading to $22,000.

Both the volume and the RSI provide overt negative divergences. The latter broke its short-term uptrend in momentum since May, while turning lower after returning to the top of its falling channel, forecasting a downfall.

Trading Strategies

Conservative traders should wait for the price to close below $29,000 before risking a short position.

Moderate traders could risk a short if the price closes below the $30,000 psychologically round key level, confirming that the pattern remains a bearish stronghold.

Aggressive traders would short at will, provided they read and understand the risks and have a sound trading plan. Here’s an example:

Trade Sample

  • Entry: $32,000
  • Stop-Loss $33,000
  • Risk: $1,000
  • Target: $29,000
  • Reward: $3,000
  • Risk:Reward Ratio: 1:3
Chart Of The Day: Why Bitcoin's Rally Won't Last
 

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Chart Of The Day: Why Bitcoin's Rally Won't Last

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Comments (7)
Satoshi Nakamoto
Satoshi Nakamoto Jul 22, 2021 1:42PM ET
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I just read the title. I will edit it. "Why I won't last as an analyst" If you think this bull run its over forget it. Number go up big time
Chukwuemeka Chidozie
Chukwuemeka Chidozie Jul 22, 2021 1:42PM ET
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TA is not about your emotionsYou'll never succeed at trading with that mindset
John Sheehy
John Sheehy Jul 22, 2021 12:20PM ET
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There is also a halving coming soon isnt there which also causes the price to increase
John Sheehy
John Sheehy Jul 22, 2021 12:19PM ET
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August 4th Eth fork and Sept 7th launch will inflate prices though
Adnan Azam
Adnan Azam Jul 22, 2021 11:29AM ET
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🤣😹... target is 29k??? why not 19k???
Pinchas Cohen
Pinchas Cohen Jul 22, 2021 11:29AM ET
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It's a trade *sample*.
Adnan Azam
Adnan Azam Jul 22, 2021 11:29AM ET
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hmm .. fair call nevertheless.. waiting for the support break
Stephen Fa
Stephen Fa Jul 22, 2021 10:39AM ET
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Just buy and hodl 10 years. Sell for over $200K
Steven Angelo
Steven Angelo Jul 22, 2021 9:16AM ET
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Using conventional technical analysis to predict shorterm moves in BTC is a fools folly. Your analysis ignores that whales bought $831 million of BTC last weekend. It also ignores that the energy usage FUD is now become a minor if not a non issue.
Pinchas Cohen
Pinchas Cohen Jul 22, 2021 9:16AM ET
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I Invite you to read my previous articles on Bitcoin, havng used technical analysis.
Mahir Magtaie
Mahir Magtaie Jul 22, 2021 9:14AM ET
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hi jost tile wat can a doo
 
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