Bitcoin volatility is back

On Sunday, June 30, bitcoin ended the week with its first daily close below the 10-day moving average in 18 sessions. Encountering 17 straight sessions of closing above that moving average (MA) is incredible and speaks to the strength of the rally. Since that moving average trend line is now invalidated, as traders, it would be wise to be defensive on the long side and opportunistic on the short side.

After a punch through $10,000, bitcoin rose another 38.67% in just 4 days after the $10,000 breach. However, the price hit strong resistance around $13,900; $13,863.13 is the highest monthly close on record (December 2017).

As we look at the momentum indicators, the price of bitcoin peaked outside the upper Bollinger Band (BB) on June 26 when we hit new, year-to-date (YTD) highs and has since been selling off. This should be expected as any price action greater than the upper BB is more than two standard deviations from its 20-day moving average (DMA). Speaking of the 20 DMA, that price has been solid support since we pierced through $10,000 -- right around $10,300. Watch the price action around $10,300 this week.

The Relative Strength Index (RSI) is range-bound and due for a bounce down here after being firmly rejected at the bottom of the range.

The Stochastic Oscillator, which tends to move a bit faster than the RSI, is quickly approaching an oversold state but we are not there yet. The same goes for the Williams %R, another momentum indicator that tends to be out in front of RSI, is nearing oversold status. Note, just because something becomes oversold does not mean it cannot stay oversold, but as we approach these oversold levels, long entries can become much clearer.

As we zoom out to the weekly timeframe, it looks rough for bulls here. After an epic amount of volume, a gravestone doji formed and as the name sounds, it tends to be lights out for out-of-position longs. More often than not, a gravestone doji is a sell signal.

On June 15, we witnessed a bullish MACD Crossover for bitcoin. Price rose to a peak of 61.12% from the beginning of the crossover, in just two weeks. Now, we are about to encounter a bearish MACD crossover. Another strong sell signal.

As expected with the day, week, quarter and first half all closing on the end of the June 30th session, we observed some consistent and controlled profit-taking (distribution) occurring into the close on Sunday.

For the week ahead, a defensive posture as a trader would be prudent. The rip through $10k has encountered some resistance, which is fine, but don't be a hero and try to pick the bottom here. There's a good chance we flush below $10k, thus filling that CME gap up that occurred on June 23rd. Recall, all gaps get filled. If you're currently long spot, shorting futures and actively managing your spot risk could be a boon this week given the choppy waters ahead.

Good luck!