As we entered the 4th quarter of the year, the talk of the town is the low volatility of bitcoin. In fact, we just went through the least eventful month since July 2017. After the violent price drop in early September, bitcoin has been more or less just oscillating in the mid $6k area. As the joke goes, even the 100x leveraged trades weren’t easily liquidated.
Trading volume has also been fairly low. However, this in no way means that the asset is losing its appeal. Low volatility, accompanied by a contraction in volume, is actually (and obviously) typical for the final stages of triangle patterns. Indecision is the name of the game here.
In such an environment, it is worth remembering that trend indicators are not as reliable as in more volatile times. Waiting on the sides through this boredom extravaganza is thus probably the safest course of action.
4 hour time frame:
Since reaching its apex last Friday, bitcoin price has been in a steady and uneventful downtrend. I expected it will at least touch the lower ascending support at $6350. However, it prematurely found some bullish momentum and quite convincingly broke the downtrend. This short-term reversal is seemingly still going strong and both of my favorite trend indicators – Stochastic and ADX – allow for more upside.
But nothing is ever easy. The first resistance is very near, around $6,650. The second proper one lies a bit higher up, at the double top area of late September. If – and I must stress the IF – this would get broken, this move will be bullish enough to propel the price across the main descending resistance line about which you can read in the previous bitcoin update.
However despite the relatively optimistic forecast the $6,600-ish entry is not optimal. Even if for now I don’t expect a sudden downward move below $6,350, low volatility makes for unreliable indicators. It’s best to leave mid-range positions to the scalpers and kamikazes.
Daily time frame:
On the daily time frame you can clearly see that the price is in mid-range. While the lower support is positioned at $5,800, the major upper resistance is positioned at around $7,200. This is where we would meet the 200 day MA as well as the lower boundaries of the Ichimoku cloud. Note that all of the past three tops since early September have been rejected by this boundary.
I must add, very curious is the current squeeze on the indicators. RSI as well as MACD are – on multiple time frames – squeezed into a triangle. Low volatility reigns everywhere.
Low volatility? Not for long.
On a final note, one of the traders who is posting on Twitter noticed a very interesting pattern in the bigger frame of BTC price action. “The last few times we’ve gotten two quarterly close in such a tiny range was at the end of both bear markets”, he says.
Still, I wouldn’t get my hope too high. History repeats itself until it doesn’t. I’ll base my trades on the price action as it unfolds. Proper opportunities for safe entries will come sooner rather than later. The market structure is about to break and low volatility won’t stay this low for long. My general take on things is rather bearish but – as they say – patience is the key.