Past performance is not an indicator of future results
Bitcoin has charted a higher trough followed by a higher peak. This is the technical definition of an uptrend. Price is struggling at the resistance area around 64,000 (red shaded horizontal). To break through this level, bullish momentum must be maintained and the stochastic (blue line) helps in assessing if that momentum is present.
The stochastic is a measure of price to range over a period, in this case, 15 weeks. A reading of 80 suggests strong momentum as prices are closing in the top quintile. The stochastic used has a slowing factor applied to make the indicator less erratic.
The current position is above 80 (blue rectangle/blue line), but if it falls below, it is a sign that the momentum is waning. This will make the resistance level formidable.
The previous momentum push is represented by the green studies:
1. The green trendline shows bitcoin's impulse up.
2. The stochastic was in the upper quintile, suggesting underlying strong momentum (green rectangle/blue line).
3. The RSI was overbought during the 6 months (green rectangle/red line), signaling mass emotion. Once the emotion ran dry, there was a severe 50% pullback (thick black horizontal).
Current levels are not overbought, and the rampant emotional attachment is absent with this leg. Thus, if bitcoin does react off of resistance, the pullback may not be as severe as previous. This presents an opportunity for the next higher trough in the series to be charted.
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.