- The Bitcoin monthly candle is painting a very negative picture for the coming weeks and months
- It is about to print the longest monthly wick in its history, showing that the run to $42,000 left it massively overpriced
- Heavy corrections tend to follow monthly wicks of this magnitude
Those hoping for a swift return to the dizzy heights of $40,000 for Bitcoin might be waiting a while longer if the monthly candle is any guide. Bitcoin is set to close the month with a $10,000+ wick, the biggest in its history by slime distance, a sign that unless Bitcoin can overcome the downward trend that it has been enduring ever since hitting $42,000 then it could be in for a rough ride in the coming weeks and months.
Bitcoin’s Monster Monthly
The monthly candle is great for assessing the long term positioning of an asset, and one look at the Bitcoin monthly chart illustrates the extent of the run from October to January, and also just how overextended it is:
January’s monthly candle is the biggest in its history, and as we can see from previous price action, wicks of these proportions almost always precipitate a price reversal:
A candle whose wick is bigger than its body indicates that a trend reversal is imminent, which in Bitcoin’s case is pretty clear – it’s been in an uptrend for four straight months and has gone parabolic. A reset of sorts is needed in order to set up a bigger run later in the year.
A Shred of Hope for Bulls
There have of course been a few monthly candles where the wick has been bigger than the body and yet price continuation has occurred, but these have been few and far between. A continuation is not out of the question, but Bitcoin will have to overcome some key levels in the next three days to offer any such hope:
Firstly, Bitcoin has to break through the downtrend it has been in since topping out in early January, something it has failed to do on three occasions, putting in lower highs each time as a result. If it achieves this it must put in some strong higher highs and reclaim key levels:
If Bitcoin can reclaim $35,000 and turn it into support then there might be a fighting chance of continuation, but the likelihood of achieving all this in three days is slim, especially with the RSI on a downtrend and yet remaining so high:
We have previously discussed the importance of the RSI indicator not just in terms of Bitcon’s immediate health but in terms of the bigger picture, but essentially it is another indicator that the next weeks and months could bring more pain for Bitcoin holders before things get better.