Altcoins Talks - Cryptocurrency Forum
Crypto Discussion Forum => Cryptocurrency Trading => Topic started by: ZionRTZ on December 11, 2018, 12:52:37 PM
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I am no TA expert but I find this article useful https://www.coindesk.com/bitcoin-oversold-on-weekly-price-chart-for-first-time-in-four-years
According to the article:
A key long-term bitcoin (BTC) price indicator is reporting oversold conditions for the first time in almost four years.
The widely followed 14-week relative strength index (RSI), which oscillates between zero to 100, is currently seen at 29.80 – a level last seen in January 2015.
An asset or a cryptocurrency is considered to be oversold if the RSI is holding below 30.00. On the other hand, an above-70 reading indicates overbought conditions.
Essentially, the under-30 reading on the 14-week RSI indicates that the recent heavy selling from the highs above $6,200 may have reached a point of exhaustion. As a result, BTC may defend the immediate support at $3,179 (200-week moving average) in the short-run.
Many experts also believe that RSI’s drop below 30.00 is followed by a strong corrective bounce. That’s not necessarily true as some markets enter into very strong trends, in which case the RSI can stay oversold or overbought for prolonged periods of times.
Notably, BTC’s ongoing bear market is looking quite resilient, as the sell-off is backed by strong volumes. Hence, a strong bounce could remain elusive for some time, despite the oversold readings on the 14-week RSI.
As of writing, BTC is trading at $3,390 on Bitstamp, representing a 2.3 percent drop on a 24-hour basis.
Weekly chart
(https://i.imgur.com/FljbNFy.png)
The RSI dropped below the key support of 53.00 on the weekly chart in late January, signaling a bullish-to-bearish trend change. As of now, it’s holding in oversold territory below 30.00.
It is worth noting that RSI’s January 2015 drop below 30.00 was short-lived and BTC soon picked up a bid in response to the oversold conditions.
Daily chart
(https://i.imgur.com/OWe5IAy.png)
On the daily chart, the immediate outlook remains bearish as long as BTC is trading below the descending trendline.
BTC failed to cut through the diagonal resistance yesterday, adding credence to the bearish setup on the 3-day chart. So too, do the 5- and 10-day MAs which are trending south.
View
- BTC could drop to the 200-week MA of $3,179 in the next day or two. That support, however, may hold ground, as the 14-week RSI is signaling oversold conditions for the first time since January 2015.
- A break below the 200-week MA would bolster the bearish setup seen in the 3-day chart and open the doors to $2,972 (September 2017 low).
- A high-volume move above the falling trendline (on the daily chart) would weaken the bearish pressure. A bullish reversal, however, would be confirmed only above $4,400 (Nov. 29 high).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Question to all resident TA experts:
So what usually happens when a coin is oversold? ;D
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So what usually happens when a coin is oversold?
I do not claim to be a TA expert but from what I understand, when a coin is oversold, it usually means it is trading below its true value.
Perhaps the more experienced traders here can put in more details to that.
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This may be a situation of bitcoin and must altcoins currently in the market in my opinion.
Now, the term oversold has several applications for an asset’s price. For one, a coin’s price can fall below its true value over only a few dsys. This is usually the result of an overreaction to the market, or a panic, and the coin is considered oversold. Often, the expectation is that an oversold coin’s (bitcoins) price has dropped too far, and will soon bounce back. But evaluating whether a coin is oversold is subjective, and it’s important to remember that a sharply falling crypto may continue to fall.
Oversold could also refers to a technical analysis situation in which an asset’s price has fallen so far that an oscillator has reached a lower bound. Technical analysts evaluate securities by studying historical and market activity to predict future performance. A coin (bitcoin) is deemed oversold and undervalued if charting its performance reveals an oscillator that has reached a low extreme. Technical analysts seek such scenarios because they present buying opportunities.