Investing

The Bitcoin Bubble Has Popped. How To Trade It Now

The Bitcoin US Dollar FX Spot Rate (BTC-USD) had been trading higher due to a golden cross that formed a year ago.

BTC traded up from $8.63 on May 25, 2020 to its all-time intraday high of $64,899.97 set on April 14, 2021. Since this high, BTC dropped to as low as $30,000.00 on May 19.

This extreme volatility was consolidated last week. The trading range on May 19 was between $30,000.00 and $43,606.75. Within this trading range is the 200-day simple moving average at $40,124.80. My semiannual pivot is $35,643 with a quarterly pivot at $40.283. This range has been a trade since May 19.

The weekly chart was downgraded to neutral during the week of May 2 when its 12-week slow stochastic reading fell below 80.00. Stochastics scale from 00.00 to 100.00 and a reading above 80.00 is overbought, while a reading below 20.00 is oversold.

The weekly chart has been negative since May 16 with weekly closes below its five-week modified moving average which is now $49,500.

The Daily Chart For Bitcoin

 Courtesy of Refinitiv XENITH

Bitcoin had been above a golden cross since it began trading a year ago. My semiannual pivot at $35,643 was a magnet between January 6 and February 3. Holding the 50-day simple moving average at $29,252.24 on January 27 proved to be buying opportunity.

The 50-day SMA held again at $51,278.28 on March 26 as another buying opportunity. When the 50-day SMA failed to hold at $56,252.44 on April 18, the daily chart suggested that strength should be used to book profits.

The sell zone within which to book profits began with its 50-day SMA at $56,973.09 on April 30. In May, my monthly risky level is $59,646 and the May high has been $59.598.22.

Once the 50-day SMA failed to hold at $56,788.97 on May 12, the downside risk was to the 200-day SMA now at $39,894.58, which has been a magnet recently. My semiannual pivot at $35,643 has also been a magnet. The May low is $30,000 set on May 19. The annual value level is $18,892.

The Weekly Chart For Bitcoin

Courtesy of Refinitiv XENITH

The weekly chart for bitcoin is negative. It is below its five-week modified moving average at $49,470. BTC has a 12x3x3 weekly slow stochastic reading declining at 53.58. Its 200-week simple moving average is rising at $12,569.

With the bubble popped, bitcoin will be extremely volatile. Use the above moving averages and my value levels, pivots, and risky levels to capture the choppy trading patterns for bitcoin.

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