Bitcoin's Uptrend Threatened by Looming 'Stochastics' Signal
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Since November 2022, the price of Bitcoin (BTC) has jumped roughly 300% from a low of $15,470. According to technical analysis from Fairlead Strategies, this stunning rally is currently defying an impending “stochastic overbought” signal in the market.
The stochastic is a momentum indicator that technical analysts and traders use to compare the current market price of a security to the price range over a specified period, typically 14 days, weeks, or months. The indicator fluctuates between 0 and 100, with readings above 80 indicating an overbought market.
A “overbought break” is when the oscillator moves down from an overbought zone above 80, warning of the beginning of a period of price declines and the potential for further price declines. Bitcoin's 14-month stochastic has broken below 80. If this holds through August, it will prove overbought.
"Bitcoin's chart shows that the monthly stochastic is overbought and awaiting confirmation. If confirmed at the end of the month, it will trigger negative momentum, indicating that the trading range has marked the end of the cyclical uptrend from the 2022 low," analysts at Fairlead Strategies wrote in a commentary for CoinDesk this week.
Bitcoin's uptrend has stalled since March, when bulls repeatedly failed to gain a foothold above $70,000, as shown by the trendline resistance on the monthly chart.
The expected decline in overbought conditions on the stochastic indicator is complemented by shallower lines on the MACD histogram and a flat Ichimoku cloud (blue-shaded area), which is a sign of “a difficult environment ahead,” according to Fairlead Strategies.
The MACD histogram is actively used to assess the sustainability of a trend and its changes. Crossovers above and below the zero line represent bullish and bearish trend changes, while the lines' height indicates the change's intensity. The Ichimoku cloud is also an indicator of momentum.
According to CoinDesk, at the time of publication, the price of Bitcoin reached $60,660.
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