Bitcoin: Bearish Divergence Analysis 1D (May 10)

10 Mei 2020

X Force Global Analysis:


We have been approaching Bitcoin from a cautiously bearish perspective, as it has been overextended and overbought for days. After a 20% correction from the local high, we reassess its technicals - specifically through divergences - to determine Bitcoin's probable cases.

Explanations of Recent Historical Divergences

Case 1. Hidden Bullish Divergence
- In this case, we see higher lows for the price, and lower lows for the indicators.
- The Relative Strength Index ( RSI ) and Moving Average Convergence Divergence ( MACD ) both show lower lows
- This bullish divergence played out to an 82% price movement upwards

Case 2. Regular Bearish Divergence
- In this case, we see higher highs for the price, and lower highs for the indicators.
- Both the RSI and MACD show lower highs
- This bearish divergence played out, leading to a -28% move

Case 3. Hidden Bullish Divergence
- In this case, we see higher lows for the price, and lower lows for the indicator
- The MACD shows a decreasing trend of lower lows
- This bullish divergence played out, leading to a 30% move

Case 4. Hidden Bearish Divergence
- In this case, we see lower highs for the price, and higher highs for the indicator
- The RSI shows higher highs
- This bearish divergence played out, leading to -24% in Bitcoin's price

Case 5. Regular Bullish Divergence
- In this case, we see lower lows for the price, and higherlows for the indicators.
- The RSI and MACD both show higher lows
- This bullish divergence played out to a 41% price movement upwards

Case 6. Regular Bullish Divergence
- In this case, we see lower lows for the price, and higherlows for the indicators.
- The RSI and MACD both show higher lows
- This bullish divergence played out to a 28% price movement upwards


Bearish Evidence

Case 7. Potential Hidden Bearish Divergence
- In this case, we are seeing a potential hidden bearish divergence setup, with lower highs for the price, and higher highs for the indicator
- The RSI shows higher highs, with further potential downside, despite a 20% correction from the local top

Market Sentiment:

The long short ratio remains at 63 to 37, with the market still dominated by bullish sentiment, despite a 20% drop.


What We Believe

While many bulls interpret this recent drop as a mere correction after a 160%+ rally from the local bottom, we believe that a corrective trend is in play, as suggested by a plethora of bearish evidence covered in our analyses.

Trade Safe.