As cryptocurrency enthusiasts, it’s important that we follow the trajectory of major coins, the largest of which is Bitcoin (BTC). It has captured the attention of the world but seems to be struggling to scale the so-called “cloud resistance”. Now, Fairlead Strategies broadsided our bullish sentiment with the forecast of a possible “overbought downturn”.
The term “overbought downturn” stems from the stochastic indicator – a tool developed in the 1950s by George C. Lane, used to gauge momentum. It fluctuates between 0 and 100, wherein readings above 80 hint at overbought conditions while below 20 indicates the opposite. A downturn from above 80 sends a signal for momentum loss that Fairlead sees reminiscent of the situation BTC finds itself in.
Fairlead Strategies’ Katie Stockton stated in a recent note, “At the end of August, bitcoin confirmed an overbought downturn in its monthly stochastics in a setback”. This downturn can be translated as a sign of decelerating upward momentum. There’s an interesting correlation with this downturn and bitcoin’s continuous failure to exceed the “cloud resistance” at approximately $31,900.
Historically, previous overbought downturns like those in early 2021 and December 2017 corresponded with notable price tops. This echoes the unsettling possibilities of a drawn-out basing or bottoming progression. That said, it’s a bit premature to forget optimism altogether, as the monthly MACD histogram, a trend strength and trend changes indicator, underscores a neutral long-term bias.
Crossovers above zero typically interpret as a bullish shift in momentum, and a drop below signifies a bearish trend turning point. Yet, with the indicator plateaued near zero after bottoming out a year ago, a sustainable upward trend remains elusive as per Stockton.
Currently, Bitcoin stabilized roughly at $25,700. Key resistance lies at the 50-day simple moving average – approximately $28,200. Immediate support is expected around the $25,200 mark. Despite these signs, it’s important to remember that the cryptocurrency market can be fickle, filled with unpredictable swings. As investors, it’s paramount that we embrace rationality over emotions, as the choppy seas of the cryptoverse are navigated with patience and education, rather than panic and speculation.
Source: Coindesk
