Get up to date on the latest analysis and trading tips with our Crypto update week 51
- Bitcoin Short Squeeze: A Merry BTC Christmas Rally on the Cards?
- Dogecoin’s RSI Hints at Potential Hidden Bullish Divergence
- BNB Price Update: Inspecting a Rare Flat Corrective Pattern
- Cardano Sees Double Smart Money and RSI Bullish Divergence
A year-end rally seems to be cooking for Bitcoin’s (BTC) price into the year’s end as the cryptocurrency appears to be bottoming out following the FTX-driven sell-off. The overcrowded downtrend has placed BTC’s price in a “short squeeze” zone that has the potential to trigger a Christmas rally.
BTC Short Squeeze Rally
The technical picture puts the BTC price in a consolidation zone but with more of an overall upward tilt to it. In the short term, we have strong support at the $16,000 level, followed by the $15,000 level. The $16,000 is significant because it is the last daily candle close where the BTC price bottomed following the FTX-driven crash.
Bitcoin Short Interest
Bitcoin’s tumble to a two-year low following the collapse of FTX has also sent the short interest in BTC to levels not seen since July 2021. Bitfinex’s BTCUSD Shorts index continues to show the short interest elevated, which can result in a Bitcoin short squeeze.
Unsurprisingly, every time the short interest rose above the 4000 level, a BTC short squeeze was triggered. While the short interest was significantly higher, Bitcoin’s price established a significant swing low in July 2021.
This year alone, based on the same short squeeze signal, we experienced 3 rallies:
1. In March, BTC price rallied around 27%
2. In May, BTC price rallied around 21%
3. In September, BTC price rallied around 22%
Whether the short-squeeze happens or not, in the short-term, Bitcoin’s price will face strong resistance around the $18,500 — $19,000 price zone.
Dogecoin’s (DOGE) key momentum metric signals a hidden bullish divergence indicating a potential rally toward the $0.10 short-term resistance level. Additionally, the daily chart shows DOGE trading above the 200-day simple moving average, which is viewed as a bullish territory.
DOGE Hidden Divergence
The hidden bullish divergence is created by the Relative Strength Index (RSI), which has printed a lower low, while at the same time, the DOGE price is making a higher low. This situation can help the bull case scenario as the price is falling at a slower pace than the RSI momentum.
If this hidden divergence holds, then DOGE’s price may correct to $0.10, where we established a short-term resistance. A daily break and close above this level will open the door for further upside towards November’s high at around the $0.15 level.
200-Day SMA
The 200-day simple moving average is a critical indicator that separates a bull market from a bear market. Since the beginning of 2022, DOGE’s price has traded below the 200-day SMA, signaling that we’re in a bearish trend.
However, since last month, the DOGE price broke above the 200-day SMA, and we’re technically in bullish territory. In these conditions, as long as the DOGE price trades above the 200-day SMA, the bulls have the upper hand.
Additionally, the 200-day SMA perfectly aligns with the $0.07 critical support level, which is also the bottom following the FTX-driven crash.
Binance Coin’s (BNB) weekly chart printed a long-term corrective flat pattern following the sell-off from May 2021 all-time high. This is rare corrective pattern, so let’s review this pattern and why $200 is the most significant BNB support level.
BNB Regular Flat
Based on the Elliott Wave theory, a flat pattern is a 3-wave corrective pattern with a 3–3–5 internal wave structure. Down from the all-time high of $704, wave A ended at a $211 swing low, and the corrective wave B ended at a $696 swing high.
Third wave C has been unfolding down from the $696 swing high in what is almost always a 5-wave structure. Here we can note an exciting price development: while wave C already extended beyond the wave A low, the internal subdivision only shows 4 waves.
Usually, the last wave in a 5-wave sequence breaks beyond wave 3, but sometimes the fifth wave fails to move beyond wave 3 in an anomaly known as a truncated fifth wave. This makes the whole BNB corrective pattern extremely rare.
BNB Support Level
The $200 level plays a major role in the whole flat pattern because, on a weekly closing basis, both wave A and wave C couldn’t break below that level. While wave C extended towards the $183 low, it could not break the $200 support.
In the short term, as the price approaches the apex ($200 support level), the 20-month corrective pattern may be near its completion phase.
Cardano (ADA) is flashing both a massive RSI bullish divergence and smart money divergence. At the same time, ADA’s price broke to its lowest level in almost 2 years, which shows that the downtrend is overextended. January 2021 was the last time we traded around the $0.25 level.
Cardano RSI Divergence
The Relative Strength Index (RSI) is a technical indicator that delivers a sign of strength. Recently, ADA’s price has been making lower lows while, at the same time, the RSI printed a higher low.
This classic bullish divergence calls for a potential reversal, because it displays that the downtrend’s momentum is weakening.
Cardano Smart Money Divergence
The RSI bullish divergence is complemented by smart money divergence. This leading indicator determines if ADA’s trend is stronger or weaker compared to the overall altcoin market.
ADA’s price has been falling at a faster pace than the Altcoin index, which tracks the overall market performance. ADA’s price printed a lower low, but the Altcoin index printed a higher one.
With ADA’s price overextended to the downside and the double divergence displayed on the daily chart, we could be approaching a convergence.
