The weekly Bitcoin chart shows the cryptocurrency consolidating in a triangle pattern (converging red trendlines). We ponder if this is a continuation pattern or an accumulation pattern. An accumulation pattern will evolve into a mark-up phase, with price above the black exponential moving average (EMA). However, the downtrend continues if the price stays below the EMA and breaks down out of the triangle. Currently, momentum is falt, typical for consolidation - the RSI is abling around 50, and the stochastic flat between the 20-80 levels.
The Bitcoin daily chart has a triple moving average as an overlay. Moving averages are trend-following indicators. This characteristic means they work well when there is a trend in motion but poorly in consolidations. To this end, there are several whipsaw signals (black ellipses) due to the weekly triangle pattern. However, if the consolidation pattern is near completion and accumulative, the current EMA formation is bullish (red ellipse). In addition, if the EMAs develop angle and separation to the northeast, bullish momentum will be building. However, if the EMAs cross back down, we will continue to watch price action development.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.