Bitcoin Tumbles Towards Washout as Crypto Enters 'Get Me Out' Phase

Keep your seat belts low and tight, here's where we may be headed.

In our June 13 review of bitcoin futures we gave a sober outlook for prices including a price target: "In this daily Point and Figure chart of bitcoin, below, we can see the breakdown and a price target of $15,750." We concluded that, "Equity traders have been looking for 'capitulation' in the stock market for weeks. Maybe the capitulation is being played out in bitcoin."

Let's check the charts again.

In this daily bar chart of the continuous bitcoin futures contract, below, we can see that prices topped out in October/November. Prices have tumbled lower but have been interrupted by periodic rallies. The rally from late January to late March was the longest. The counter-trend rallies/corrections have become shorter in duration and that is a sign to me that the bear has taken control of the move. The slope of the 50-day moving average line and the 200-day line are negative.

The On-Balance-Volume (OBV) line has been weakening since late October as traders of bitcoin have been more aggressive with heavier trading volume on days when the cryptocurrency has closed lower. The 12-day price momentum study shows equal lows in May and June even though prices made lower lows. This is a bullish divergence but it may not be significant enough to generate a recovery rally.

 

In this weekly Japanese candlestick chart of the continuous bitcoin futures contract, below, we see a bearish picture. Prices are breaking down from a major top formation. Prices are below the declining 40-week moving average line.

 

The weekly OBV line and the MACD oscillator are bearish. Chart readers will have to look back to the $10,000 area now for possible support.

 

 

In this daily Point and Figure chart of bitcoin, below, we can see a downside price target in the $16,001 area.

 

 

In this weekly Point and Figure chart of bitcoin, below, a target of $2,932 is displayed. Don't shoot the messenger.

 

 

Bottom-Line Strategy

My first experience with capitulation came in 1975 when a business executive committed suicide across the street when he jumped from the Pan Am Building. Capitulation can also be marked by Chapter 11 filings, put buying and investors dumping their positions with no regard to price -- get me out! The news flow from the "crypto world" has become very negative and it has entered that "get me out" phase, in my opinion. Keep your seat belts low and tight around your waist.

 

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