This is daily analysis from CoinDesk analyst and certified market technician Omkar Godbole.
Bitcoin has remained above $100,000 for four consecutive months, a price stability that can be interpreted as the formation of a solid base for the next upward movement.
However, a major volume indicator, used to confirm price action, gives a mixed signal.
The indicator considered is the On-Balance Volume (OBV), described as the “grandfather” of all volume indices by Charles D. Kirkpatrick II and Julie R. Dahlquist in their book Technical Analysis: The Complete Resource for Financial Market Technicians.
On-balance volume (OBV) is a running total of an asset’s trading volume that adds volume to the total on days the price closes higher and subtracts it when the price closes lower.
The OBV indicator is widely used to confirm price trends and can also serve as an early warning signal for possible resolution of a price range.
“When prices are within a trading range and OBV breaks through its own support or resistance, the breakout often indicates the direction in which the price breakout will occur. Therefore, it provides early warning of the breakout direction of a price pattern,” Kirkpatrick II and Dahlquist said in their book.
BTC’s OBV did just that, warning of a bigger drop in BTC’s price.
While Bitcoin price remains above $100,000, the OBV indicator has fallen below its own range, dropping to levels last seen on April 24, when BTC was trading around $94,000.
This decline in OBV signals underlying weakness, suggesting that demand may be weakening and prices may soon fall below $100,000. The bearish message is consistent with macroeconomic factors, which also favor a prolonged decline in prices.
Other momentum indicators, such as the MACD histogram, are flashing bearish signals. The indicator forms deeper bars below the zero line on the weekly chart, indicating strengthening bearish momentum.
Key levels
As of this writing, bitcoin is trading well below its 50-day simple moving average (SMA), a key short-term trend measure, and is getting dangerously close to critical support near $107,300.
This support is marked by the intraday lows at the end of August from which the last upward movement began. A break below this level would shift attention to the June 22 low, around $99,225.
On the upside, the 50-day SMA remains the level to beat for bulls.
