TD9 Sell Signal Hints at a Possible Correction After Bitcoin Gained 40%
On May 1, the Bitcoin (BTC) price hit $9,065, after surging to $9,481 the previous day. The 35% increase in the price of Bitcoin within nine days led a highly accurate sell signal known as the TD9 to flash.
TD9, a sell signal which is a part of the TD9 Sequential system, is activated when the price of an asset rises nine days in a row above its price four days before the nine-day run.
For instance, on the daily timefreame the Bitcoin price closed at $7,125 on April 19. From April 23 to May 1, BTC consistently hovered above $7,125 for nine consecutive days, triggering the TD9 sell signal.
According to historical data, the TD9 signal usually leads to a 12 to 20 per cent near-term pullback in the Bitcoin price. The indicator shows overextended movements to both the upside and the downside, showing if Bitcoin is oversold or overbought.
Traders expect a post-halving sell-off for Bitcoin, and TD9 matches the timing
The Bitcoin block reward halving is believed to happen on May 12 and in previous halvings the Bitcoin price tended to enter a bull run before the event and a sell-the-news style correction right after it.
Traders already predict that 2020 halving will impact the price in the way similar to the 2016 halving.
Cryptocurrency investor and hedge fund manager Logan Han stated:
“BTC halving right in front of our noses. Previous halving — BTC made a dip down and then made its run to ATH. If $9,450 was the top of this pre-halving pump, I expect BTC to pull a move similar to the previous halving.”
In the past two weeks, Bitcoin price surged by 40%, breaking key levels like the 200-day simple moving average (SMA), and the 0.618 Fibonacci Retracement level calculated in between $3,600 and $14,000.
Often, when an asset breaks key levels in the way Bitcoin did in a short time frame, it faces a threat of a steep downtrend in the short-term.
Bitcoin signals indicate that a correction is underway
The case for a post-halving sell-off in the crypto market is now stronger due to three key factors. The latest 40% vertical rally with no consolidation periods, the emergence of the TD9 indicator, and the fact that Bitcoin is overbought.
The Relative Strength Index (RSI) is consistently standing above 75%, which means that BTC is overbought after its recent rally. Despite this, crypto traders have different opinions on Bitcoin’s trajectory in the upcoming weeks.
The prevalence of spot volume over futures strengthened the theory that the rally from $3,600 to $7,000 was led mostly by actual retail demand, which means that the rally was organic. But, the run up from mid-$7,000 to $9,400 was caused mainly by the futures market which may hint that the uptrend is overextended.