All short-term momentum indicators up to the daily timeframe are now in an oversold condition. This would suggest that Bitcoin (BTC) is about to make its next upside move. Nevertheless, a major hurdle is on the horizon in the form of the weekly Stochastic RSI, posturing a swing back down in the indicators that can potentially bring some future heavy downside price momentum. Caution is required.
Keeping it simple in trading
In the field of technical analysis there are countless charts and indicators that can point a price in one direction or another, and often, at any particular point in time. Therefore, one strategy that tends to iron out the often perverse market fluctuations over time is that of keeping things very simple.
There are a small number of indicators for Bitcoin, that if used over the longer time frames, will generally help to show the main trend that $BTC is following, and give pointers as to when we need to sit up and take notice that a trend break is about to occur.
The Stochastic RSI is one of the most reliable indicators in this respect. It is used to measure momentum and identify overbought or oversold conditions. On the higher, weekly time frame, the Stochastic RSI is exhibiting an overbought condition – thus the cause for concern.
Before looking at the bigger picture, the shorter time frames are currently looking bullish. They are suggesting that there could be a nice upside surge that could develop into the weekend.
Correction from all-time high still taking place
Source: TradingView
In the 4-hour time frame it can be seen that the correction from last week’s all-time high is still taking place. The bears were able to force the price below the important $106,000 support, and $BTC is now at the $105,000 support level. There is the possibility that the price could drop through here, but it isn’t expected. If it does, the furthest dip to the downside would likely be to the $102,500 horizontal support.
What is more likely is that the price will start to bounce from here, and could then gain momentum from all the short time frame Stochastic RSI indicators crossing up from the bottom. The targets would be to break back above $106,000, pierce up through the descending trendline, make a higher high, and then have the possibility of getting back to the all-time high.
3-day chart shows concerns are beginning
Source: TradingView
The 3-day chart shows that concerns are beginning. The ascending trendline is in the process of being broken, and should the current red candle still be on the wrong side of this trendline by the end of Friday, the breakdown will be confirmed. Having said that, the horizontal supports are very important, and a close above $106,000 would be seen as a victory for the bulls.
At the bottom of the chart, the Stochastic RSI on this time frame is looking ominous, with the indicator lines shaping to fall back down through the 80.00 level, and by doing so, bringing downside price momentum with them.
Weekly Stochastic RSI signals a potential cross-down
Source: TradingView
As already mentioned, the weekly time frame is potentially the most problematic at this point in time. While it can be seen that the price is starting to roll over, it’s at the bottom of the chart where things are starting to become a little worrying. The Stochastic RSI has the blue indicator clearly angled down, and it is posturing to cross over the red indicator line.
However, it’s not all doom and gloom quite yet. If the expected rally does take place into the last part of this week, the indicator lines could just end up flatlining along the top, much as they did in a 3-week period at the end of 2024.
That said, they will have to come down at some point, putting an end to the upside price momentum. Is there still time in this bull market cycle for the indicator lines to drop all the way back to the bottom and then come back up for one last hurrah into Q4? Yes there is. Also, the indicator lines could bounce along the top for an extended period of time.
The main take away here is that when the weekly Stochastic RSI indicators are at the top it signals caution to long-term traders, whereas when they are at the bottom, buys are signalled.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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