– Persistent bearish divergences may temper bullish breakout on the daily chart.
– Weekly chart signals one primary Ichimoku condition may halt some upside momentum.
Bitcoin (BTCUSD) Daily Ichimoku Chart
Above: Bitcoin (BTCUSD)
Bitcoin has certainly had a terrific and explosive breakout setup on its daily Ichimoku chart. The current daily chart setup is an excellent example of all the conditions necessary to confirm one of the most sought-after Ichimoku breakout entry strategies: the Ideal Bullish Ichimoku Breakout. The requirements for this entry are:
1. Close above the Cloud.
2. Tenkan-Sen is greater than the Kijun-Sen.
3. Chikou Span above the Cloud.
5. Future Span A is above Future Span B
a.If Future Span A is below Future Span B, then Future Span A must be pointing up while Future Span B must be flat or pointing down.
All of the requirements above are true. However, there is some worry related to the oscillator levels. The Relative Strength Index is trading up against the last overbought level in a bear market at 65 and is struggling to break above that level. Additionally, there is hidden bearish divergence between the candlestick chart and the Composite Index. The hidden bearish divergence is between the lower highs on the price chart from September 6th/7th to October 5th and the higher highs in the Composite Index during the exact dates.
Bitcoin (BTCUSD) Weekly Ichimoku Chart
Above: Bitcoin (BTCUSD)
Bitcoin’s weekly chart also shows extremely bullish conditions. The same conditions required to fulfill the Ideal Bullish Ichimoku Breakout as identified in the daily chart are fulfilled save one: The Chikou Span above the candlesticks and in open space. While the chart does look overwhelmingly like it’s prepped for an explosive move higher (and it certainly is!), the fact that the Chikou Span continues to trail just below the candlesticks is a concern. The Chikou Span is the lynchpin and the confirmation signal in Ichimoku analysis. We could be looking at a massive fakeout move higher here. The Relative Strength Index on the daily chart remains in bull market territory but has found difficulty return to levels above 60. This is the fifth consecutive week where the Relative Strength Index has failed to breach 60. Additionally, the %B is now nearing its upper band – which could be bullish only if the Composite Index crosses its fast average and the Chikou Span closes above the candelsticks.