Bitcoin’s [BTC] Supertrend indicator recently signaled a sell, suggesting that the leading cryptocurrency could be headed for a more significant price correction as investors intensify coin distribution, a crypto analyst noted in a recent tweet.
Notice the precision of the SuperTrend indicator anticipating when to buy and sell #Bitcoin! It recently signaled a sell, hinting at a deeper price correction.
For a bullish reversal, $BTC needs to close above $29,500. If not, brace for more losses. pic.twitter.com/TFQ3Djtiqj
— Ali (@ali_charts) August 27, 2023
The Supertrend indicator is a tool deployed toward identifying and following market trends. While it is a lagging indicator that generates signals after the trend has already begun, traders view it as a useful tool for trend confirmation and for deciding the right time to enter and exit trade positions.When an asset’s price is above the Supertrend line, the market is considered to be in an uptrend and is generally read as a buy signal. Conversely, when an asset’s price rests below this indicator, a sell signal is generated, with the market considered to be in a downtrend.
An assessment of BTC’s price movements on a daily chart showed that the coin’s price fell below its Supertrend line on 17 August, following a leverage flush-out in the derivatives market that saw over $2.5 billion in market liquidity withdrawn within a few hours.
Source: BTC/USDT on TradingView
Ali conducted a historical assessment of this indicator vis-a-vis BTC’s price reaction and found that it correctly signaled sell signals in June and November 2022 and buy signals in August 2022 and February 2023.
According to the analyst:
For a bullish reversal, BTC needs to close above $29,500. If not, brace for more losses.
Do not give up hope just yet
The severe bearishness of BTC’s current market cycle cannot be overstated. The bear cycle was confirmed by the coin’s Moving average convergence/divergence (MACD) indicator. It showed the MACD line crossing below the trend line following the capital exodus of 17 August. The indicator has since been positioned and has only returned red histogram bars.
Also, the coin’s Aroon Up line (orange) has since trended downward and returned a value of 7.14% at press time. When the Aroon Up line is close to zero, the uptrend is weak. And the most recent high was reached a long time ago.
On the other hand, the Aroon Down line (blue) was spotted in an uptrend at 57.14%. At this position, the price downtrend remained strong, and the most recent low was reached relatively recently.
Source: BTC/USDT on TradingView
However, despite these worrying indicators, BTC’s key momentum indicators hinted at a possible price rebound.
Bitcoin’s Relative Strength Index and Money Flow Index were spotted at oversold zones of 25.37 and 10.94, respectively. Typically, upward price corrections are expected at this point, as sellers often find it difficult to initiate any further price drop-downs.
Source: BTC/USDT on TradingView
Although, for this to happen, market sentiment must improve
Source: Santiment
