Bitcoin price has been hovering in the mid to high range of $ 50,000 for weeks, and neither side – bears or bulls – is making any headway.
The sideways movement has broken the most recent parabola, but the typical downward reaction has not occurred. By comparing past bull market cycles and their breakpoints using a “parabolic” indicator, the tool confirms that recent progress has been broken. However, it also suggests that the bull market itself may not be over.
Bitcoin parabola is broken according to the trend indicator
Technical analysis indicators often encompass multiple strategies using the same tool. For example, the Bollinger Bands contract and expand with volatility, but when price goes through the mid-SMA it can be a strong buy or sell signal.
The parabolic SAR is one of those tools created by J. Welles Wilder Jr. The engineer also created the Relative Strength Index and the Average Directional Index.
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The parabolic SAR informs traders where to move their stop losses and when a trend has ended. As the trend gains momentum, the SAR points rise or fall as the price moves. When price action returns to penetrate the dots it is a signal for the trend stopped and vice versa – hence what the SAR itself stands for.
Currently, within two weeks, the SAR is suggesting that the trend in Bitcoin is over. The last two times within the two week timeframe it has been a long to medium term spike.
The Parabolic SAR suggests the parabola has been broken on high timeframes | Source: BLX on TradingView.com
Technical Analysis 101 and Why the Crypto Cycle Isn’t Over
This technical analysis lesson is just getting started, however, and you will soon get an idea of how subjective it can be.
The next chart is another technical indicator that has a wide variety of uses. During the same period there are several other signals that confirm that the uptrend has continued and that a downtrend could be imminent.
A red "1" signals a new downtrend has started | Source: BLX on TradingView.com
Any time a red “1” signal is shown on the TD Sequential display, it has started a downtrend of reasonable length. The first started the bear market while the second ultimately led to Black Thursday. What might come next is everyone’s guess, but it’s possible that things get violent.
Related reading | The creator of the error-free top indicator says that despite the signal, Bitcoin is not done
However, looking back at past Bitcoin bull cycles gives more hope for further uptrend.
Bulls could be taking a rest before the final leg up | Source: BLX on TradingView.com
The same parabolic SAR indicator always paused of a reasonable size in the middle of two-thirds of the cycle.
If the theory is correct, there should be either a correction or a sideways movement here. But any outcome is likely to involve another wave before all is said and done for this market cycle.
Featured image iStockPhoto, Charts from TradingView.com