Those burned by the last big Bitcoin bull run are rightly skeptical that there will be another one so soon. However, a trend strength indicator now confirms the existence of a new bullish trend.
Do bulls finally have control over crypto again? Investors and traders who are sidelined will pay attention.
How Technical Data Can Confirm a New Bullish Trend in Bitcoin
Bitcoin price is retreating after a few failed attempts to break through the USD 38,000 resistance. This sudden weakness after a major breakout is both comforting for bears and confusing for bulls. Those on the sidelines still don’t know what to do.
But that’s what technical indicators are designed for: to eliminate noise and emotion so the tools can make the decisions for you.
According to a trend strength metric called the Average Directional Index, the bullish Bitcoin trend just became official as the indicator rises above 20. The last time BTCUSD rose above 20 while the bulls were in control was in August 2020, previously rallying over 450%.
By comparison, a further 450% rally would bring the price per coin to around $200,000. However, each individual trend behaves differently and arrives at different ADX measurements. This means anything is possible, but for now the rise above 20 on the ADX is notable.
The trend is confirmed by a reading above 20 | BTCUSD on TradingView.com
How to Tell Bulls are in Control of Crypto with the ADX
The Average directional index, as mentioned, is a tool to measure trend strength. It was created by J. Welles Wilder, Jr., known as the father of several technical analysis indicators. Wilder also developed the Relative Strength Index, Average True Range and Parabolic SAR.
The ADX confirms that a trend is active above 20, while anything below 20 indicates a weak trend and possible sideways price action. The tool often includes two additional indicators, the DI+ and DI-, which show which side of the market is in control of the price action.
If the DI+ is higher, the DI bulls are in control. Bears are in control when DI- is above DI+. The premise is simple and provides an easy way to visually see which side of the market dominates.
Not only are the bulls in control, but the DI+ is at 36, while the high in August 2020 was 32. This means the bulls are stronger now than they were then, and look what happened.
The above diagram was originally seen in Issue #27 of CoinChartist VIP: The Ethereum Issue. Check out the latest issue for free.