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Bitcoin - The bullish breakout and potential bull trap

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Yesterday, Bitcoin broke above its resistance at 31 411.48 USD. In our last post on BTCUSD, we noted that this would be a bullish development. However, we also said we would pay close attention to volume if the breakout occurred. Currently, the volume does not seem sufficient to sustain the rally from the breakout zone (31 411.48 USD). In addition to that, the stock market shows weakness which weighs on the price of Bitcoin. At the same time, we also foresee pressure from fundamental factors like higher interest rates and economic tightening. As a result, we have no reason to change our bearish outlook for BTCUSD; we still expect it to make new lows.

*Although, in the short-term, if the stock market erases losses and continues to march higher, it will provide a further lifeline for BTC (temporarily).

Illustration 1.01

The picture above shows a bullish breakout above the resistance at 31 411.48 USD. However, in our opinion, a low volume raises caution, hinting at a potential bull trap.

Technical analysis - daily time frame
RSI, Stochastics, and MACD point to the upside. However, we expect them to start reversing soon. DM+ and DM- are due to perform a bullish crossover; if they fail, it will bolster the bearish case for BTC. Overall, the daily time frame is bearish.

Technical analysis - weekly time frame
RSI, MACD, and Stochastic are bearish. The same applies to DM+ and DM-. Overall, the weekly time frame is bearish.

Please feel free to express your ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.

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Our thoughts were updated in the following post: