Those burned by the last big Bitcoin bull run are rightfully skeptical that another one is here so soon. However, a trend strength indicator is now confirming the existence of a new bullish trend emerging.
Are bulls finally back in control over crypto? Sidelined investors and traders will want to pay attention.
How Technicals Could Confirm A New Bullish Trend In Bitcoin
Bitcoin price is pulling back after a few failed attempts to make it though $38,000 resistance. This sudden weakness after a major breakout is both reassuring for bears and confusing for bulls. Those on the sidelines still aren't certain what to do.
But that's what technical indicators were designed for – to eliminate noise and emotions, allowing the tools to make the decisions for you.
According to a trend strength measuring tool called the Average Directional Index, the bullish Bitcoin trend just became official as the indicator reaches above a reading of 20. The last time that BTCUSD reached above 20 while bulls were in control was back in August 2020, prior to a 450%+ rally.
For comparison sake, another 450% rally would put the price per coin around $200,000. However, each individual trend behaves differently and tops out at different ADX reading. 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 trend strength measuring tool. 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 a trend is active above a reading of 20, while anything below 20 suggests a weak trend and potential 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 price action.
If the DI+ is above the DI- bulls are in control. Bears are in control if DI- is above DI+. The premise is simple and provides an easy way to visually see which side of the market is dominating.
Not only are bulls in control, but the DI+ is at 36, while the highest reading back in August 2020 was 32. This means that bulls are stronger now than they were back then, and look what happened.
The above chart was originally featured in Issue #27 of CoinChartist VIP: The Ethereum Issue. Check out the latest issue for free.
Source: NewsBTC.com
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