Ichimoku Cloud, created by Japanese journalist Goichi Hosada in the 1960s, is broadly used to gauge momentum and tendency strength.
Bitcoin’s (BTC) recent price slide may have legs, reports by technical analysis by alternative investment management company Valkyrie Investments.
The leading digital currency by market price has declined by 10 percent to $26,200 these 30 days, thanks to renewed hawkish Fed bets, the recovery in the United States dollar index, and the lingering United States debt ceiling uncertainty.
Per Valkyrie, a further decline toward $24,000 could be seen as bitcoin’s daily chart Ichimoku cloud, a momentum indicator, has flipped bearish.
Japanese journalist Goichi Hosada created the Ichimoku Cloud in the late 1960s. The indicator comprises 5 lines: Leading Span A, Leading Span B, Conversion Line or Tenkan-Sen (T), Base Line or Kijun-Sen (K) and a lagging closing price line.
The difference betwixt Leading Span A and B makes up the cloud, which is used to identify broader trends. A positive tendency cloud is green, while a bearish one is red. Crossovers of Tenkan-Sen, a nine-day price mid-point, and Kijun-Sen, a 26-day price mid-point, are used to identify short-term trading signals.
The chart below shows a green Ichimoku cloud, indicating a constructive broader outlook. Nonetheless, the cryptocurrency’s price has recently fallen back into the cloud, and the Tenkan-Sen (blue line) has crossed below the Kijun-Sen (red line), confirming a bearish crossover.
“This suggests an ongoing high-timeframe positive tendency tendency with a decline in positive tendency momentum and the capacity for near-term retrenchment,” analysts at Valkyrie, led by Chief Investment Officer Steven McClurg, wrote in a note to clients on Tuesday.
The early March Bitcoin (BTC) pullback ran out of steam at the lower end of the cloud, with the subsequent bounce taking prices to $31,000 by mid-April.
“A price close within the cloud is suggestive of losing cloud support and triggers the likelihood of traversing to the opposite [lower] edge of the cloud. In this case, an Edge-to-Edge trade would attract prices to around $24,000,” analysts added.