Bitcoin price is still trading well above $ 30,000 after the highs retreated by almost $ 5,000 at the turn of the year. In the first decent sized correction to the cryptocurrency since breaking $ 20,000, a “parabolic” indicator could suggest that the daily uptrend has been lost.
Here’s a closer look at the parabolic SAR indicator and what it currently says about the first cryptocurrency and whether the unstoppable rally will continue.
Bitcoin’s daily uptrend may have ended for now, according to parabolic SAR
When Bitcoin hit $ 3,800 on Black Thursday, retested its bear market bottom and confirmed that resistance turned into support, it gave bullish investors all the confidence in the world that the cryptocurrency would last.
If this scary day didn’t shake the owners out, nothing would. Since then, BTC has said goodbye to the stock exchanges and digital gold history has taken over the financial world.
Related reading | Bitcoin closes 2020 as the most powerful asset of the last decade
In addition to resuming FOMO in retail, the institutes are now buying Bitcoin with everything they have – suddenly interested in the asset to protect and store their vast wealth.
All of this wealth pouring in before the price per BTC gets too high has resulted in the cryptocurrency climbing from $ 3,800 to just under $ 30,000 in 2020 in just one year. At the start of the new year, the cryptocurrency added nearly $ 5,000 more in less than five days.
But as of last night, the asset’s deepest correction began, possibly ending Bitcoin’s uptrend in the daily timeframe, according to the parabolic SAR indicator.
The parabolic SAR indicator was in the daily time frame | taken source: BTCUSD on TradingView.com
Not so fast: The collapse of the daily parabola is giving momentum to a long time frame
The Parabolic SAR (Stop-and-Reverse) indicator lives up to its name by potentially detecting when an asset’s parabola has stopped and vice versa.
In the image above, the red wick of the evil daily BTCUSD candle touched the SAR point below the price movement, so a new SAR was displayed on top. In this case, it usually indicates that the trend will reverse.
The tool has been described as being up to 80% accurate and is also helpful for traders who want to employ a trailing stop loss strategy where stop loss gains keep rising just below any SAR point. If the price movement subsides again and the trade stops, the trader is profitable and can be sure that he was stopped at a point where the trend ended anyway.
However, as with all indicators, their use does not only apply to daily time frames. In weekly and monthly periods, the uptrend at current prices is exposed to very little risk.
Related reading | Analyst: Bitcoin Parabolic Trend is about to collapse
In weekly periods, Bitcoin must be below $ 22,000 for the parabola to be violated. In order for the monthly uptrend to complete, price action needs to drop to just $ 6,100 before worrying about another long-term bear phase.
With these low numbers, it’s hard to imagine reaching them anytime soon. And with high timeframe signals, the integrity of the larger bull market is not compromised by the most dominant, even short-term retracing of daily timeframes.
It’s worth noting that the parabolic SAR indicator increases with price, so these numbers will change based on how the cryptocurrency performs next.
To take into account that the daily upward trend is to resume, Bitcoin must withdraw $ 34,750 and continue from there.
Featured image from deposit photos, charts from TradingView.com
