Bitcoin: A Simple Bearish Divergence Analysis 1D (May 06)

X Force Global Analysis:


- Bitcoin is forming a textbook bearish divergence on the daily
- Prices are creating higher highs, while the Relative Strength Index (RSI) is creating lower highis
- It's also important to note that the RSI is creating lower highs in an overbought territory
- The Moving Average Convergence Divergence (MACD) also shows decreasing bearish histograms, with a potential death cross in play
- The volume is extremely dry, and suggests that many traders have already taken profits from their long position
- We are overly extended above the envelope, suggesting potentiality for a pullback
- While divergences on the hourly and 4 hour chart often get negated, we believe this divergence is highly likely to play out due to the fact that it's spotted on the daily
- We could see a potential correction down to the 0.618 FIbonacci support, which would be in line with the ascending trend line support on the daily

Market Sentiment:

Long short ratios are at 70 to 30, with overly bullish sentiment in the market.

What We Believe

We believe that it's highly likely that a correction is due, based not only on the bearish divergence, but also on how extended we are in terms of the overall trend.

Trade Safe.