Hidden Bearish Divergence For Bitcoin: Warning For The Rest Of The Market?

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Bitcoin (BTCUSD)

Above: Bitcoin (BTCUSD) Chart

A technical analysis condition that I’ve talked and written about a lot over the past few days is a condition known as hidden bearish divergence. There are two primary forms of divergences: regular and hidden. Regular bullish divergence occurs when the price swings on a chart make lower lows, while an oscillator like the RSI makes higher low. Regular bearish divergence occurs when price makes higher highs, but the RSI makes lower highs. Regular divergence is a warning sign to the overall trend that it may be weakening and changing direction. Hidden divergence, on the other hand, is a warning sign that price will soon continue in the prior traded direction. Hidden bullish divergence occurs when price makes higher lows, but the RSI makes lower lows. Hidden bearish divergence occurs when price makes lower highs, but the RSI makes higher highs. Bullish divergence will always compare highs against highs and bearish divergence will always compare lows against low. I sometimes think it’s easier to compare the two forms of divergence as indicators of trend change (regular divergence) or trend continuation (hidden divergence).

Bitcoin’s daily chart currently has hidden bearish divergence. The blue arrows point to the candlesticks and the corresponding values on the RSI. Notice where the current price action has stopped on Bicton’s chart: right up against the Kijun-Sen. The Tenkan-Sen is not far away from this level either. There is strong resistance present on Bitcoin’s chart in relation to where it is presently trading. However, the hidden bearish divergence could be eliminated very easy and quickly. If Bitcoin were to create a new high above the referenced high, then then no hidden bearish divergence would exist – yet. Assuming that Bitcoin were to push higher and re-test the $40k value area as resistance, I would expect a strong showing of resistance near the bottom of the cloud (Senkou Span A). In the scenario where Bitcoin were to test 40k (Senkou Span A), then the position of the RSI would be extremely important. When an instrument shifts into a bear market, the overbought levels in the RSI also change. The overbought levels in a bear market are 55 and 65. Bitcoin tested the 55 level as recently as June 14th and June 15th. If Bitcoin tests this level against so soon after the previous test, then it may push on up to 65. I believe that will be a place where Bitcoin will ‘make or break’ for a big move higher or lower. But we’ve got some time before that scenario would play out. For now, it’s best to just watch and observe as the market continues to settle.

Another day, another dump for most cryptos, but Dash surges on Webull listing

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Ethereum has sunk to a fresh three-and-a-half week low as risk assets sell-off amid concerns about the Delta variant.

This morning Ether was trading for US$1,789, down 4.7 per cent from yesterday and the first time it has traded below US$1,800 since June 27.

Bitcoin was changing hands for US$30,661, down 2.7 per cent.

The only top 100 coins trading higher in the last 24 hours were Dash, Revain (REV), and iFinex’s Leo token.

The latter two were up marginally, but Dash was soaring after it was listed on Webull, a Robinhood-like commission-free trading platform.

Dash was up 20 per cent to a one-month high of US$134, making it the No. 50 cryptocurrency with a market cap of US$1.4 billion.

The privacy-oriented, masternode-governed Litecoin fork was a top 10 coin from 2015 through 2017, but its shine has faded in recent years with the rise of next-generation cryptocurrencies.

On the flip side, 18 of the top 100 coins were down by double-digits, with NEM (XEM) the worst performer, falling 19.2 per cent to US12.3c.

Gaming token Axie Infinity was trading at US$15.41, down 46 per cent in the last five days after rising more than sixfold in the three weeks before that.

‘Another day, another dump’

Analyst Bitcoin Charts posted that things didn’t look great for Bitcoin.

“Another day, another dump. Is it done yet?”

He wrote that there was some still bullish divergence on the four-hour chart,

“But it’s important to note that, yes, we are still in a macro downtrend, and there’s a high probability for there to be hidden bearish divergence if we see a bounce.

“Ultimately it’s much more reasonable to expect continued downside in the coming days and possibly weeks.”

If Bitcoin did break its June 22 low of US$29,337, “there are a few daily support levels I’m keeping my eye out for as the first line of defence.”

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Cryptocurrency Price Levels To Watch Over The Weekend For Cardano (ADA) And Bitcoin (BTC)

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Cardano (ADAUSD)

Above: Cardano (ADAUSD) Chart

Cardano – like many of the coins I follow – printed a clear example of hidden bearish divergence on its daily chart. Hidden bearish divergence is warning that a continuation move lower is likely. For Cardano, this may be the case. At the time of writing this article (1830 EST), Cardano is down -6.73%. This is the second day in a row where bulls have pushed Cardano higher only to face stiff short pressure at the Kijun-Sen. If Cardano closes below the Tenkan-Sen on the daily chart, then we may see a very, very likely move lower. The next support zones I see shouldn’t be a surprise to any regular readers. The next primary support zone below $1.20 is the $0.84 - $0.94 value area. But below that is a whole lot of nothing and zero support until the 2021 POC (Point Of Control) at $0.33.

Bitcoin (BTCUSD)

Above: Bitcoin (BTCUSD) Chart

Bitcoin’s price action here is quite bearish. On the daily chart, it shows imminent breakdown lower is likely. The chart above is the weekly chart. There are several items on this chart that I want to call attention to. The first condition is the bearish nature of the Ichimoku chart. Price is below both the weekly Tenkan-Sen and Kijun-Sen and the Tenkan-Sen has just crossed below the Kijun-Sen. A ‘TK-cross’ (when the Tenkan-Sen crosses above/below the Kijun-Sen) itself is not a reliable trade signal, but I’ve learned that significant weight should be given to the TK-cross when a substantial amount of time has occurred since the last TK-cross. For Bitcoin, the last TK-cross was over a year ago during the week of May 11th, 2020. The second bearish condition on the chart is the Chikou Span – it’s trading inside the candlesticks and if Bitcoin were to close the week below 33,000, then the Chikou Span will transition to be being below the candlesticks. This has not occurred since the week of August 26th, 20219. But what really makes me believe we’re heading lower is the lack of any kind of test of the Kumo on the weekly chart since the breakout of the Kumo in June 2020. The blue arrow points to the week of July 19th, 2021 and the 23,244 value area. This value area is shared by a high volume node in the volume profile and the weekly Senkou Span B. The week of July 19th represents a 98-day period from the all-time high and completes an important Gann cycle. I anticipate Bitcoin to be trading near that value area by late July/early August before we start to see a month or so of consolidation before another spike higher to end 2021.

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