This is a daily analysis by CoinDesk analyst and Chartered Market Technician Omkar Godbole.
Bitcoin has held above $100,000 for four consecutive months, a price stability that can be interpreted as the formation of a solid base for the next upward move.
However, a large volume indicator used to confirm price trends shows a contrasting signal.
The indicator under consideration is On-Balance Volume (OBV), described as the “grand daddy” of all volume indices by Charles D. Kirkpatrick II and Julie R. Dahlquist in their book Technical Analysis: The Complete Resource for Financial Market Technicians.”
On-Balance Volume (OBV) is a running total of an asset’s trading volume that adds volume to the statement on days when the price closes higher and subtracts when the price closes lower.
The OBV indicator is widely used to confirm price trends and can also serve as an early warning signal for a possible resolution of a price range.
“When prices are in a trading range and the OBV breaks its own support or resistance, the break often indicates the direction in which the price breakout will occur. Therefore, it provides an early warning of breakout direction from a price pattern,” Kirkpatrick II and Dahlquist say in their book.
This is exactly what BTC’s OBV has done, warning of a deeper selloff in BTC’s price.
While bitcoin’s price remains rangebound above $100,000, the OBV indicator has broken below its own range, falling to levels last seen on April 24, when BTC was trading around $94,000.
This decline in OBV signals underlying weakness, suggesting that demand may falter and prices may soon slip below $100,000. The bearish message is consistent with macro factors, which also favor a longer price decline.
Other momentum indicators, such as the MACD histogram, are flashing bearish signals. The indicator is forming deeper bars below the zero line on the weekly chart, indicating strengthening downward momentum.
Key levels
As of this writing, bitcoin is trading well below its 50-day simple moving average (SMA), a key short-term trend gauge, and is perilously close to critical support near $107,300.
This support is marked by intraday lows at the end of August, from which the last upward move began. A break below this level would shift focus to the June 22 low around $99,225.
On the positive side, the 50-day SMA remains the level to beat for the bulls.
