Bitcoin’s Technical Roadmap

This is turning out to be a Technical Battle Royale!

I’ve had a lot of people tell me that you can’t use technical analysis on Bitcoin.

That’s rubbish.

Frankly, I would argue that there are no fundamentals to study on Bitcoin, so the only two things that forecast the price are technical analysis and sentiment. Lucky for you, those are my specialty.

So, dive into this chart with me for about three minutes to tip the price action in your favor.

bitcoin chart

(Click to enlarge)

First, the only three lines you need to watch on this chart.

  1. The 50-day moving average (green)
  2. The 20-day moving average (red)
  3. $40,000 “Round Number Support” (orange)

These are the two trendlines that are dictating Bitcoin’s movement. Right now, the 20- and 50-day moving averages are “in play” as support, but there’s a twist.

A very simple rule to follow when using the 50-day is that when it is trending higher the underlying has a 67% chance of continuing to move higher each day.

This simple rule provides a bullish backdrop for Bitcoin, which is why my current target remains at $50,000+. But there’s a catch.

We recently saw a “cross under” as the shorter 20-day moving average crossed below the 50-day. This is traditionally a warning sign, as it tells us that the short-term momentum is weakening. It puts pressure on the 50-day to hold as support, which is exactly what we’ve seen over the last two days.

The current battle at $43,000 is drawing less volume, indicating that bitcoin traders are taking a wait-and-see approach to the technical battle. This means that confidence in this support is waning, which may put more pressure on the market to sell.

Keep in mind that Bitcoin just went through a massive sentiment even with the SEC’s approval of spot priced Bitcoin ETFs a few weeks ago. This produced a “sell the news” event that broke both moving averages we’re looking at and put the third line - $40,000 - into play as round numbered support.

Put this all together and you get the following…

Bottom Line

Bitcoin is walking a technical tight rope right now.  While the short-term trendlines are helping to recover prices and forecast higher values in the wake of the massive “sell the news” move. That said, it is critical that Bitcoin holds above $40,000 during this consolidation.

A break above $44,000 in the next few days will confirm strength and bring buyers back into the market, pushing prices to $50,000, while a break below $40,000 will pen the asset to more profit-taking and a likely short-term drop.

Enter your email for stocks to watch, market overviews, and more stories like this each morning.

By submitting your email address, you will receive a free subscription to Money Morning and occasional special offers from us and our affiliates. You can unsubscribe at any time and we encourage you to read more about our Privacy Policy.

About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

Read full bio