Weakness In Bitcoin Holds Its Annual Value Level. Here’s How To Trade It Now.

Bitcoin (BTC) set its all-time intraday high of 68,999.99 on November 10, 2021. This day was a key reversal day as its close that day at 64,268.40 was below the low of 66,106.95 set on November 9. This began the slide we have seen since then.

When I wrote Bitcoin Rally Reaches Its Risky Level For October I was looking for downside risk. The risky level for October 2021 was 57,814.

For the first quarter of 2022 my risky level is 56,153. So far this year through January 24 my annual value level at 33,021 held. The upside is a return to the 200-day simple moving average at 48,697.

The Daily Chart for Bitcoin

Bitcoin was in a golden cross formation 52 weeks ago. The vertical lines are each trading day during this time horizon. The first wave high was to 64,899 set on April 14, 2021. The downside from this high was to 28,800 set on June 22.

From this low bitcoin rallied to its all-time intraday high of 69,000. You can see that this day was a key reversal. The day’s close was clearly below the prior day’s low. Note the failed death cross and then the failed golden cross. When this happened odds favored a trading-range market which has been the case.

The horizontal lines in the middle of the chart are the semiannual and annual value levels at 28,763 and 33,021, respectively, and this higher level held at the low so far.

A death cross occurred on January 15 when the 50-day simple moving average fell below the 200-day simple moving average. The higher horizontal line is the quarterly risky level at 56,153.

The Weekly Chart for Bitcoin

The weekly chart for bitcoin is negative but oversold. It’s below its five-week modified moving average at 43,944. It’s well above its 200-week simple moving average or reversion to the mean at 19,326. The last time the 200-week SMA was tested was during the week of March 22, 2020, at 5,569.

The 12x3x3 weekly slow stochastic level is declining at 15.19, which makes bitcoin oversold. The reading below 20.00 on a scale of 00.00 to 100.00 makes bitcoin “too cheap to ignore.”

Trading Strategy: Buy bitcoin on weakness to its annual and semiannual value levels at 33,021 and 28,763, respectively. Reduce holdings on strength to the quarterly risky level at 56,153.