According to Bloomberg, the Williams Percentage Range for Bitcoin is sitting at -83%, indicating that the popular cryptocurrency market is oversold. This suggests that a corrective rally may soon occur to bring Bitcoin back up to its equilibrium.
The Williams Percentage Range was developed by Larry Williams and is a technical analysis oscillator that indicates market momentum. It compares Bitcoin’s price to the highest high and lowest low over a 14 day period, using the formula Williams Percentage Range = (Highest high – Bitcoin price)/(highest high – lowest low) multiplied by -100. A Williams Percentage Range between -80 and -100 indicates oversold conditions, and overbought conditions when it’s between -20 and 0. The Williams Percentage Range has gained notoriety among technical analysts since it has a good track record of predicting market reversals.
Generally, it is good practice to combine the Williams Percentage Range with other indicators to make a more accurate forecast. One indicator is that the Bitcoin price has been holding steady above a support level of USD 5,800 consistently, and it has already risen to USD 6,500 at the same time the Williams Percentage Range indicates oversold conditions. This suggests that the current rally will gain steam. A true market reversal would be if Bitcoin’s price breaks above USD 7,500, the high of the rally peaking on 4 September 2018, and an even more solid sign of a true market reversal would be if Bitcoin goes above USD 8,500, which it hit during the rally that peaked on 24 July 2018.
The 2018 Bitcoin market has been defined by rallies with progressively lower peaks, while lows have been at or slightly above the USD 5,800 support level. So, if it breaks the trend of progressively lower rally peaks, that might indicate the bull market is truly here.
The Relative Strength Index (RSI) is another popular indicator used to determine oversold conditions. Right now the RSI is at 45 according to Bitfinex data on Bitcoinwisdom, after being as low as 35 on 7 September. An RSI below 30 indicates oversold conditions, and an RSI over 70 indicates overbought conditions. The RSI isn’t officially in oversold territory, but it got close when Bitcoin bottomed out near USD 6,100 on 7 September. The RSI got as low as 26 in mid-June 2018 before the rally to USD 8,500 that peaked in late July, so RSI seems to be a solid indicator for Bitcoin.
Overall, market indicators such as the Williams Percentage Range and RSI indicate that Bitcoin is currently oversold, increasing the likelihood of a rally, at least for the short term. Bitcoin could rise significantly above its current level of USD 6,500.
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