Monthly Chartbook - Too Early to Call It a Comeback [January 2022]

Before we dive into this month’s chartbook, it’s important to make note of the current market environment we find ourselves in. While the last few days have provided us with some much needed relief, there’s no guarantee the worst is behind us yet. The gravitational pull of market forces can weigh on prices for even the most attractive assets, some of which have suffered significant drawdowns the last couple months even despite improving fundamentals. We put together this report each month as a way to shed light on some of the top trends and developments we’re watching, regardless of market performance. Price action is important, but it’s only a piece of the bigger picture.

Key Technicals

• So far, the Guppy’s have done a good job keeping traders and investors away from false macro bottoms, sidestepping much of the drawdown in Bitcoin and crypto assets.

• After a small period of compression after the most recent pullback into the $30ks, the blue grouping of moving averages underwent a quick period of rapid expansion, penetrating the long term grouping. This was the result of the recent 10% BTC ‘chad’ candle, driving price higher. This is the first time since July 2021 that the short term grouping has expanded and penetrated the long term grouping in a bullish fashion. This is a very notable evolution in our analysis, and it tells us that a trend reversal is certainly in play.

• For a review of the Guppy Multiple Moving Average, please refer to this note.

• Another way visual the macro trend is to utilize Heikin-Ashi candles on your favorite charting software. Heikin-Ashi candles, used in conjunction with the Guppy’s used above, are extremely powerful when finding key trend inflection points. Setting your candle timeframes to 3D or 1W helps to filter out daily minutia and noise, while keeping the overall trend front and center.

• According the the Heikin-Ashi candles, it appears as though a clear trend reversal is in the making on the weekly chart. A telltale sign of a potential reversal is when a candle occurs with a small body surrounded by upper and lower wicks, clearly visible in the below chart. The following green candle signals the start of a healthy uptrend as there is no lower wick.

• For a review of the Heikin-Ashi candles, please refer to this note.

• We outlined the most notable resistance levels we’re watching in “The Fight Against The Resistance”, which have since been broken through to the upside. For reference, these included:

  • $38.5K — This was the price level where BTC initially tried to find support before nuking into $34K. This level acted as resistance for several days, before finally losing out to the 10% BTC ‘chad’ candle.

  • $40K-$41K — This area is the prior range low and has confluence with 2022 yearly VWAP, located around $39.2K. After initially acting as heavy resistance on the first attempt, price was held at bay for two days before breaking through this resistance zone as well.

  • $44k-$46K – Price now has targeted the previous range highs, around $44K. At this point, higher timeframe resistance comes into play and this zone will likely see profit taking activity. Be cautious opening new longs in this area.

• Repeat after me: previous resistance becomes support when broken. Our previous resistance zones of $38.5K and $40-41K have been flipped, so these are the new support zones should price begin to retrace some of this rally.

• The latest price selloff at the end of January pushed BTC into oversold territory for the first time since May 2021, measured by its daily RSI (a reading <30 represents “oversold territory”).

• Since 2013, BTC experienced positive forward returns ~55% of the time over the subsequent 30 days following oversold readings. Periods of positive returns saw an average gain of ~15% while the average decline for BTC was (-12%) in the