Crypto breakout drives massive short-covering, looks important technically

Key Takeaways

• Many Cryptocurrencies look to have made significant technical breakouts starting early Friday morning with BTCUSD, SOLUSD, ETHUSD, LTCUSD, and XRPUSD all jumping 8% +
  
• Technically this looks to be a positive given prices having eclipsed weekly highs as well as one-month downtrends. This gives rise to the possibility that BTCUSD might be kicking off its traditionally bullish 4Q seasonal rally
  
• Momentum remains positive on weekly charts and has turned quickly back to positive territory also on daily charts as a result of Friday’s surge

Bitcoin finally resolved its 10-day sideways range by exceeding the downtrend which had been in place since early September. Note, trends had turned negative a month ago technically, but after a visible three-wave decline into late September, Friday’s move is a big positive in helping to resolve this consolidation. First upside target lies at September highs at 52,956, then 64,895

Key Technical positives:

Daily and weekly momentum now positive per MACD (Moving Average Convergence Divergence)

DeMark counter-trend indicators triggered TD Sequential “13 Countdown” signals on 60 min and 120 minute charts that often can be important in signaling trend change in late September

The early Friday 10/1 move above 9/24 peaks at 45,164.41 resulted in massive short-covering and Futures short liquidations at the highest level in over a month

My cycle composite created with the Cycle Finder Application from the Foundation of the Study of Cycles shows Bitcoin trending up into late November/December before peaking. This same composite showed successful rallies into late 2017 as well as into early 2021, bottoming in July

As seen below, Bitcoin’s break of its 10-day consolidation Triangle pattern was instrumental in fueling a massive short-covering and technical buying binge. While momentum is certainly overbought now on an hourly basis, dips likely are buyable as daily momentum remains nowhere near overbought levels with a daily RSI (Relative Strength Index) reading of 55.

Cycles:

• Daily cycle composite (measuring trading days) which peaked out in late 2017, Summer of 2018 and 2019 and Spring of 2021 now shows the next minor peak in late November with the possibility of a smaller mid-October peak
• This Daily cycle composite showed prominent bottoms in November 2020 and July of 2021 and bottoms again next Spring in 2022
• Weekly cycles using lengths of 43 and 88 weeks, along with other harmonics that have been successful in gauging the last three major peaks in bitcoin, the current weekly cycle does show the potential for weakness into Spring 2022 before the next major rally. Thus, this current rally might prove to be tactical in nature before consolidation sets in and the larger rally might begin next year.