Bitcoin Analysis using RSI Bands and Pitchforks
If you have ever wondered how to estimate the exact price corresponding to future RSI oversold and overbought levels, there's an indicator for that called RSI bands. It's basically Bollinger Bands for RSI. It plots the RSI oversold/overbought band lines relative to the price. You watch when the price touches the bands.
On the chart there are several P contact points where daily RSI was oversold, and corresponding T points from a resulting move up.
There are also several pitchforks to put the Bitcoin price movement into some perspective.
We go:
- from P1 to T1 - the upper channel of the green pitchfork (internal retracement)
- from P2 to T2 - the upper channel of the blue pitchfork (external retracement with extended channel), crossed the supply line to start the new red pitchfork
- from P5 to T5 - 6800 can be estimated as a cross between the new supply line and the extended channel of the red pitchfork. After that we will switch to another fork.
Conclusions:
1. We won't break 6000 today, we started correcting upwards.
- Lower RSI Band is currently flat and coincides with a major 6000 psychological level providing support. For the price to go up the lower RSI Band needs to start declining rapidly like it did before.
2. We won't go below 5800 because:
- at 5800 there's a strong green trend line supporting the lower RSI band from the start of correction - we will likely bounce up from it. The angle of the bounce will be lower and it will take longer to complete.
- RSI Bands are squeezing to prepare for a major move (similar to Bollinger). They are still elastic enough and hard to break, there's enough room for the price to move inside. However, we can quickly probe a deeper level and return inside the bands. RSI Bands are not set in stone, they adapt to accommodate the price similar to Bollinger. The bands can be broken.
3. Volume is declining. There will be another sell off near June 29th
- Yellow lines are the expiration dates of the CME futures. You can see that there's no point for the price to go up before the expiration on 29th, because they went short. There was a similar sell off before.
4. We will likely stay above the supply line (purple trend line from 20000)
5. We have a divergence on a daily RSI that can't be invalidated without breaking 6000 (which won't happen today), so a move up is likely,
6. The move T1-P2 was reversed/mirrored as P2-T2 because the price came close but did not reach the mean line of the blue pitchfork. In this case a reversal of the whole prior swing is likely.
7. A bounce up in P5 is likely according to the Rule of Threes because of the slope angle and it will be the 3rd touch of the supply line (P3, P4, P5)
On the other hand, in P5 we can also touch (and break down) the lower RSI bands trend line (or bounce up and break it later on 4th time - just as likely).
Good Luck!
Please don't trade based only on my analysis. This is not a financial advice, I'm not responsible for possible losses.
On the chart there are several P contact points where daily RSI was oversold, and corresponding T points from a resulting move up.
There are also several pitchforks to put the Bitcoin price movement into some perspective.
We go:
- from P1 to T1 - the upper channel of the green pitchfork (internal retracement)
- from P2 to T2 - the upper channel of the blue pitchfork (external retracement with extended channel), crossed the supply line to start the new red pitchfork
- from P5 to T5 - 6800 can be estimated as a cross between the new supply line and the extended channel of the red pitchfork. After that we will switch to another fork.
Conclusions:
1. We won't break 6000 today, we started correcting upwards.
- Lower RSI Band is currently flat and coincides with a major 6000 psychological level providing support. For the price to go up the lower RSI Band needs to start declining rapidly like it did before.
2. We won't go below 5800 because:
- at 5800 there's a strong green trend line supporting the lower RSI band from the start of correction - we will likely bounce up from it. The angle of the bounce will be lower and it will take longer to complete.
- RSI Bands are squeezing to prepare for a major move (similar to Bollinger). They are still elastic enough and hard to break, there's enough room for the price to move inside. However, we can quickly probe a deeper level and return inside the bands. RSI Bands are not set in stone, they adapt to accommodate the price similar to Bollinger. The bands can be broken.
3. Volume is declining. There will be another sell off near June 29th
- Yellow lines are the expiration dates of the CME futures. You can see that there's no point for the price to go up before the expiration on 29th, because they went short. There was a similar sell off before.
4. We will likely stay above the supply line (purple trend line from 20000)
5. We have a divergence on a daily RSI that can't be invalidated without breaking 6000 (which won't happen today), so a move up is likely,
6. The move T1-P2 was reversed/mirrored as P2-T2 because the price came close but did not reach the mean line of the blue pitchfork. In this case a reversal of the whole prior swing is likely.
7. A bounce up in P5 is likely according to the Rule of Threes because of the slope angle and it will be the 3rd touch of the supply line (P3, P4, P5)
On the other hand, in P5 we can also touch (and break down) the lower RSI bands trend line (or bounce up and break it later on 4th time - just as likely).
Good Luck!
Please don't trade based only on my analysis. This is not a financial advice, I'm not responsible for possible losses.
Comment:
And we have a pump. So, 5800 did hold as a local bottom, as predicted
Comment:
We usually break the RSI Brands trend lines on the 3rd or 4th time. We either break it or bounce up depending on the slope's angle and other market conditions. The breaking point is usually the overbought or oversold level or close where the price touches the green/red lines at the corresponding contact point.
After breaking the trend price follows the corresponding line down or up for some time (and the opposite line kind of shadows the price). When it's time to reverse the price stops following the line and the line starts kind of mirroring the price in the opposite direction.
He were just near the possible 4th contact point on the green RSI bands trend line sloping down. hence the pending move up likely any time soon (now)
After breaking the trend price follows the corresponding line down or up for some time (and the opposite line kind of shadows the price). When it's time to reverse the price stops following the line and the line starts kind of mirroring the price in the opposite direction.
He were just near the possible 4th contact point on the green RSI bands trend line sloping down. hence the pending move up likely any time soon (now)
Comment:
Trends don't change with a single pump. This can be a wave B upwards correction of an ABC, with pending wave C. Tomorrow's sync with the futures will tell. We can still go down. See my prev analysis With Bear in Mind:
Comment:
This does not look bullish at. It's a synthetic move to manipulate the market. If we are not rejected now by H4 EMA50 we can go as high as EMA 100 (6600) to match the prev RSI 62 in a triple top and complete the ABC upwards correction. Also we are almost oversold on H1 already. On a daily it's a clear ABC.
Based on volume we're going up, volume is increasing and there's some buying. 5bln daily volume is better than 3bln.
And we haven't even reached EMA50 on the futures chart - there's only a weak move up. So, we will likely just replay friday's events (from where the futures hit pause) and try to break 6000 again. Also there was already a small bear trap just now, so a move down and rejection is likely soon. If not - expect a sideways trend and a selloff around the 29th.
Based on volume we're going up, volume is increasing and there's some buying. 5bln daily volume is better than 3bln.
And we haven't even reached EMA50 on the futures chart - there's only a weak move up. So, we will likely just replay friday's events (from where the futures hit pause) and try to break 6000 again. Also there was already a small bear trap just now, so a move down and rejection is likely soon. If not - expect a sideways trend and a selloff around the 29th.
Comment:
Here's your sell-off as predicted. If 5800 bottom holds we will return to 6000 soon.
Comment:
And we have a $400 pump and break $6000 back up as predicted.
1. We are already at the historic RSI 25 of P1 in P4, hence the divergence, so, we won't go any lower and a short term bounce up (still in a bear trend) is likely.
The green trend line on the lower RSI 30 band is supporting this but it can be broken.
2. We will go even lower because after P4 the RSI is still curving down compared to P1 where it went straight up. So, another low with even lower RSI is possible. What the next target might be?
If you plot RSI 26 (blue line) on the chart in a 2nd RSI Bands you will see that the corresponding bottom is 5450. And for RSI 25 it is even lower at 5330. Also note that the blue trend line is already broken and not supporting these lows (this line doesn't have as much weight as RSI 30 trend, it just connects the corresponding lows). At these lower levels we will either have an RSI double bottom and bounce up or invalidate the divergence and move further down.