It’s not a bird, and although it’s been soaring, it isn’t a plane either. It’s Bitcoin and the latest bull run just hit its first wall after over an entire year in an uptrend.
The rally was stopped by a “Super” sell signal acting as dynamic resistance, leaving BTC potentially in danger of reversal.
Bitcoin Braces For The Worst After Reaching Downtrend Resistance
Bitcoin price has given buy signals galore since reached a bottom in late 2022. Throughout 2023, BTCUSD rallied more than 300%. But despite the climb, on higher timeframes such as the monthly, sell signals remain intact.
One such signal exists on the 1M SuperTrend – a powerful trend-following technical indicator created by Olivier Seban. Using CME BTC Futures, there has only ever been one sell signal generated on the 1M timeframe, and it still stands despite BTCUSD smashing right into it this month.
Sell Signal Stands In The Way Of New Crypto ATHs
The SuperTrend marks a price chart with a dynamic support and resistance line. When price penetrates through the line on a closing basis, the sell signal changes to a buy and vice versa.
The tool is so accurate, downtrend resistance is currently located at $44,621, which is just a few hundred dollars more than December 2023’s close around $44,200.
Bitcoin made another attempt at smashing through SuperTrend downtrend resistance, but continues to trade below the span. Closing above the SuperTrend line in January would be a notable win for crypto investors. However, a breakout could arrive later in February or March after some sideways consolidation below resistance.
Why The Buy Signal Could Cause A Mid-Cycle Correction
Upon zooming out, it’s easy to see that passing through the SuperTrend on the 1M timeframe in BTCUSD might not be the fast-track to new all-time highs that it sounds like it might be.
Historically, after the SuperTrend has given a buy signal, a mid-cycle correction sets Bitcoin back by months. But this typically has happened only after the buy signal is generated. Could this time be different?
Charts featured in this article originally appeared in the CoinChartist VIP 2024 preview and issue #32: This Time It’s Different.
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