According to the beyond reproach source of the world's free encyclopedia, Wikipedia, bitcoin was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto. So, it seems fitting to look at bitcoin using Japanese candlesticks and the techniques from the 1740s. Japanese traders also look at all the western techniques that have only been around the past 70 years or so.
In our last review of bitcoin on March 5, I wrote that, "For me, the risks of being long bitcoin and probably all cryptocurrencies are too high right now. Avoid them." The nearby CME bitcoin future has moved higher in the past week but that doesn't mean the charts are bullish.
Time for "mining" some charts.
In the daily Japanese candlestick chart of the nearby CME bitcoin future, below, we can see some interesting clues. Prices are up more than five-fold in the past six months. Prices are more than twice the level of the rising 200-day moving average line which intersects around $20,000. Typically, when a stock or other instrument is trading at twice the 200-day average it is considered extended or overbought. Prices can always get more overbought and extended but this guideline is pretty good.
The pattern of Friday's candle could be a bearish hanging-man pattern. However, we would want to see confirmation with a bearish candle this coming Monday.
Trading volume has been diminishing since early January and that is not a good sign. Volume should increase in the direction of the trend. Even since Feb. 8 when Tesla (TSLA) revealed they had purchased bitcoin the trading volume has declined. Has Elon Musk lost some of his magic? The On-Balance-Volume (OBV) line has been pretty much stalled since early January and thus is a bearish divergence when compared to the price action.
The trend-following Moving Average Convergence Divergence (MACD) oscillator has crossed to the upside for a buy signal but it could easily turn lower again.