The price formed a new 2019 high towards $5,590 this Tuesday and its likelihood of testing $6,000 to the upside has increased.
Mr. Anderson, a analyst, revealed the proximity between the price and the shorts behavior in his . The analyst noted that whenever traders push shorts positions in the overbought area, the probability of a price jump increases.
The bitcoin Shorts-bitcoin Price Relationship
Mr. Anderson presented a chart to prove the relationship between the two metrics, as shown below:
Shorts vs. Price | Source: Mr. Anderson
The chart above provides six separate instances in which the price starts rising after every overbought correction in shorts. shorts considered overbought when its Relative Strength Index (RSI), a momentum indicator, closes above 70. The last time the Shorts RSI hit over 70 was in December 2018.
As it corrected lower, the price surged from $3,151 to $4,300. In another instance, which took place during August-September session, a Shorts RSI correction to the downside led a 20 percent surge.
A short position typically signifies the investors’ bearish sentiment for the underlying asset. A trader borrows the asset and sells it at a higher rate. Later, s/he speculates the asset’s price to fall so s/he could purchase it at a lower rate and return the equal amount of assets he/she borrowed back to his/her lender.
Therefore, the trader profits from the “short ” of the asset. However, if the asset price gains instead of falling, the trader loses money, for s/he purchases the asset at a higher rate to return it to his/her lender.
Bears Beware?
My style is simple. Play the higher probabilities and accept the results
The Bears have been throwing supply on the market & we can think of reasons why this could seem logical
However, they must be careful as they are nearing a DANGEROUS situation
— Mr. Anderson (@TrueCrypto28)
“Our data is limited,” wrote Mr. Anderson. “However, every time we have seen SHORTS hit a 70-plus RSI on the daily scale, BEARS got cooked. We are not there yet, but BEARS should be quite careful.”
bitcoin to $6,000?
The earlier Shorts corrections led to a price surge amounting to as little as 8 percent. At the current $5,500 price support, a minimum 8 percent jump to the upside could quickly push to $5,940. That would certainly increase the coin’s probability of hitting $6,000, which was a crucial support level before the Cash hard fork fiasco had it broken.
Bulls | Source: TradingView.com
The technical factors outside the scope of overbought Shorts are also pointing to a higher price. After weeks of speculation, ’s 50-days moving average (blue) crossed above its 200-days moving average (red). Though NewsBTC has earlier , the pattern nevertheless remains a strong reason for traders to hold their long positions.
As of now, the price needs to break above $5,800 to signal an upside continuation. Couple that with RSI correction in Shorts and the market might be in a for a price rally towards $6,000 – at last.
Published at Tue, 23 Apr 2019 16:04:03 +0000
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