Bitcoin price remains stagnant for going on months now, with no clear trend developing and volatility in a downward spiral. However, some subtle signs are popping up that could suggest that a bullish Bitcoin trend is beginning to take shape.
“The trend is your friend” is one of the most famous trading quotes, highlighting how capturing as much of the prevailing trend as possible can lead to the most profitable results.
For this reason, in technical analysis, trend-following tools are among the most successful. But what is an investor or trader to do when there is a clear absence of any discernible trend?
The answer is “to wait for the trend to appear” but that’s easier said than done. This is why specific tools have been created to tell when assets like Bitcoin or even stocks are trending or not. One such tool is starting to rise after several weeks of sideways price action, and it suggest that the underlying trend is strengthening.
The Average Directional Index (ADX) is a trend strength measuring tool, created by the father of technical indicators, J. Welles, Wilder, Jr. Other tools Wilder built include the Parabolic SAR, Average True Range, and the Relative Strength Index.
A reading above 20 on the ADX means a trend is developing. The more it turns up, the stronger the trend. After weeks of sideways, the trend is starting to strengthen again.
The tool also includes two Directional Movement indicators, the DI+ and DI-. The DI+ is currently above the DI-, showing that bulls in control of the underlying price action. All that’s left is for the ADX to strengthen further and Bitcoin could finally break out of this range and begin trending.
What Bitcoin bulls ultimately want to see next is for the ADX to grow even steeper, similar to what we can see in late 2020 and into early 2022. The lack of another strong trend at the second 2021 peak was a warning that something was off. Will the bullish trend continue to strengthen, or will bears regain control?
#Bitcoin 1W Average Directional Index is turning back up above 20 — this is the signature of a strengthening trend
DI+ is above DI- which shows bulls are in control
Trend-following tools may soon prove more useful with a trend growing pic.twitter.com/9nAUEVIcL3
— Tony “The Bull” (@tonythebullBTC) August 14, 2023
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