Alessio Rastani gives a brief Bitcoin technical analysis update
Alessio Rastani reviews Bitcoin's recent breakout above key resistance levels and assesses whether a market bottom may be in place.
Summary
Alessio Rastani presents a short technical update on Bitcoin, noting that it has broken above several important resistance levels, including the 50-week simple moving average and the May 2024 highs. He references the Dow Theory model as interpreted by trader Manuel Bllye, who identifies the simultaneous breakout in both Bitcoin and Ethereum as a significant bullish signal. Rastani acknowledges that two similar Dow Theory signals earlier in the year proved to be false, and is candid that there is no certainty the current signal will hold — but argues that disciplined adherence to the system is the correct approach regardless.
Key Takeaways
FULL TRANSCRIPT
Bitcoin breaks above key resistance levels
Alessio Rastani: Bitcoin has finally managed to push through some important resistance levels. The first is the 50-week simple moving average — the 50 SMA — which you can see on the chart. Breaking through that is a very positive development. Then there was the golden cross that occurred some weeks ago. In the member video, Alessio mentioned the golden cross, which is usually followed by some kind of pullback — which is exactly what happened. And then finally, Bitcoin managed to push through the other important resistance level discussed previously: the May highs, the spring highs on Bitcoin.
That key level at the May highs has now been taken out. The reason that matters is because of the Dow Theory model as developed by Manuel Bllye of DowTheory.com. Manuel Bllye — a good friend and fellow trader — noted that both Bitcoin and Ethereum have now taken out their respective resistance levels. For Bitcoin, that was the May high. For Ethereum, it was the spring high. In both cases, key resistance has been broken, which has triggered a Dow Theory bullish signal.
Dow Theory signal and what it means for the crypto market
According to Manuel Bllye, this is an important and significant bullish factor for the crypto market — for Bitcoin and Ethereum, and potentially other cryptos as well. In other words, the probability has increased that Bitcoin and Ethereum have bottomed and that a brand new uptrend may be beginning.
Several things are coming together for Bitcoin that are quite positive. Also, from an Elliott Wave perspective, it is possible to argue that there are five waves up in the recent rally on Bitcoin, which indicates an impulsive move. As is well established with Elliott Waves, new trends typically begin with an impulse wave.
Addressing the risk of another false signal
There is an important question that needs to be addressed: how can we know that this new Dow Theory signal on Bitcoin and Ethereum is not another false signal? As many will be aware, Bitcoin has triggered two false signals based on the Dow Theory model so far this year. One was a bullish signal that occurred back in May, which was then followed by a drop. That drop then triggered a Dow Theory bearish signal — which also turned out to be a false signal, occurring back in the summer.
So how can we know that this new signal, as per the Dow Theory rules, is not also a false signal? The truth is, because there is no crystal ball, we simply cannot know what the future holds. One of the most important principles in trading and analysis is consistency. If the approach is to follow a specific model that carries a potentially high probability, then that is what must be done. According to Manuel Bllye, this new Dow Theory signal is very bullish for Bitcoin because it potentially increases the probability that a bottom has formed and that a new bull market has started on Bitcoin and Ethereum.
But again, given the two false signals earlier this year, the question is fair: could this also be another false signal? The honest answer is that we don't know. All that can be done is to follow the rules and follow the system. It could be a false signal. And here is the key point: if Bitcoin and Ethereum were to drop below key support levels — which are discussed in much more detail in the member video — that could potentially negate or invalidate this new bullish signal. That invalidation only applies if Bitcoin and Ethereum drop below those support levels. But for now, as long as both remain above support and continue in some kind of uptrend, the recent developments represent a very bullish factor and a good sign for the crypto market.