Bitcoin broke the $5,000 mark on April 2 grabbing the headlines across the globe. For traders, it was mainly about FOMO (Fear Of Missing Out). It is natural to have this kind of feeling especially if one has paid attention to the past performance of Bitcoin. Year-to-date it is up 34 percent. Since 2014, there have been several bull rallies for Bitcoin and each of this was stronger than the previous one. I have explained it in this article and still maintain my call in relation to this.
Best bull signal & past performance
To keep things simple, I am going to keep the focus on the moving averages as these get the most amount of attraction from bigger institutions that trade traditional assets. The concept is the same over here as well.
For the Bitcoin price, the 50-day Smooth Moving Average (SMA) (shown in pink color on the chart below) and the 100-day SMA (shown in green color) on the daily time frame are really important. The argument is that the crossover of the 50-day and 100-day SMAs is of critical importance. This is because it represents a buy and sell signal. History tells us that when the 50-day moving average crosses above the 100-day moving, it produces a solid buy signal. The last crossover occurred back in April 2016. The exit signal comes when the price drops below the 50-day moving average.
Source: ThinkMarkets, Bloomberg, Twitter:@NaeemAslam23
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Similarly, when the 50-day moving average drops below the 100-day moving average, it presents a short opportunity. Again, the exit signal comes when the price crosses above the 50-day moving average.
The below chart shows that the 50-day moving average has crossed above the 100-day moving average. This is a strong bull signal. For active traders, the healthier entry point was when the price crossed above the 50-day moving average. Nonetheless, I believe that the signal produced by the crossover of the two moving averages is robust and the bull run has solid potential if the price stays above the 50-day moving average.
Passive investors can wait for the price to cross above the 200-day moving average on the daily chart. Currently, the price is in a constant battle with this. The recent attempt has failed to cross above this average however, the daily candle is looking extremely bullish. If the price stays above the $4,782 level, it is likely to cross above the 200-day moving average.
Disclaimer: I hold Bitcoin in my wallet