Bitcoin's (BTC) Uptrend Threatened by Looming 'Stochastics' Signal: Fairlead Strategies

The pending signal, if confirmed, would imply a challenging time ahead, according to analysis by Fairlead Strategies.

Bitcoin’s price has surged nearly 300% since lows around $15,470 in November 2022.

The remarkable uptrend is now challenged by a looming "stochastics overbought downturn" signal, technical analysis by Fairlead Strategies shows.

Stochastics is a momentum oscillator technical analysts and traders use to gauge a security’s market price in relation to a price range over a specified period, usually 14 days, weeks or months. The indicator ranges from 0 to 100, with readings above 80 indicating an overbought condition.

An "overbought downturn" has the oscillator moving down from the overbought territory (above 80), signaling a weakening of the uptrend and the potential for price declines.

Bitcoin’s 14-month stochastics crossed below 80 in March. The overbought downturn will be confirmed if the stochastics fails to recover by the end of August.

"The monthly chart of bitcoin shows a pending overbought downturn in the monthly stochastics. If confirmed at month-end, it would be a negative catalyst, suggesting the trading range marked the end to the cyclical uptrend from the 2022 low," analysts at Fairlead Strategies wrote in a note shared with CoinDesk on Wednesday.

Bitcoin's uptrend has stalled since March, with bulls failing to establish a foothold above $70,000, as shown by the trendline resistance on the monthly chart.

The pending overbought downturn on the stochastics indicator comes as the MACD histogram bars are getting shallower and the Ichimoku cloud (the blue shaded area) is flattening out, a sign of a "challenging environment going forward," Fairlead noted.

The MACD histogram is a widely followed indicator of trend strength and changes. Crossovers above and below the zero line, respectively, indicate bullish and bearish trend changes, and the height of the bars shows the strength of the move. The Ichimoku cloud is also a momentum indicator.

Bitcoin was trading at $60,660 at press time, CoinDesk data showed.

EDITED BY

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team. A markets veteran, he was previously an editor at Bloomberg News and Dow Jones Newswires. Follow him on Twitter at @godbole_o.

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