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- A counter-trend signal in bitcoin has Katie Stockton of Fairlead Strategies advising clients to hold off on buying the cryptocurrency for now.
- Stockton expects a two-week period of sideways consolidation that could include a 16% pullback before bitcoin's long-term uptrend continues.
- "We would view any resulting consolidation as temporary," Stockton said.
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Bitcoin's 33% rally in October has catapulted the cryptocurrency into short-term overbought territory and flashed a counter-trend signal that could lead to choppy trading ahead, according to Katie Stockton of Fairlead Strategies.
In a note to clients on Sunday, Stockton advised clients who are looking to add crypto exposure to hold off on buying bitcoin for the next two weeks after a DeMARK "13" signal flashed for bitcoin.
The counter-trend exhaustion signal suggests a two-week consolidation phase is in store for bitcoin, which could include a pullback to its cloud support level near $48,000. That represents short-term downside potential of 16% from current levels.
The DeMARK sell signal was also affirmed by a downturn in the daily stochastics indicator from overbought levels, according to Stockton. But the long-term uptrend in bitcoin remains intact, leading Stockton to view any resulting consolidation as "temporary."
"We would liken this signal to the one that was generated in January," Stockton said. In January, the same counter-trend signal flashed right before bitcoin fell 25% from about $40,000 to about $30,000. That consolidation phase lasted about three weeks before bitcoin went on to print new all-time highs for three consecutive months.
And after bitcoin decisively cleared the $52,900 resistance level last week, Stockton sees the cryptocurrency targeting its prior all-time-highs of about $65,000, representing potential upside of at least 13% from current levels.
Despite the counter-trend signal triggered on Sunday, bitcoin continued its grind higher, jumping about 2% in Monday's trading session.
