Bitcoin (BTC/USD) experienced a surprising $750 ($996 CAD) surge over 3 hours on Monday, after a fairly stable weekly close, mainly as a direct result of the escalating trade war between the US and China.
The Yuan hit an 11 year low on Monday and US Indices are down after further tariffs were imposed by Trump, rattling Wall Street and Asian equities as investors flee to safe havens such as gold and the Yen.
Bitcoin surged to a high of $10 650 ($14 153 CAD) on Bitstamp, a major horizontal resistance level. After unsuccessfully retesting this level, BTC has subsequently experienced a close to 0.618 Fibonacci retracement, finding support at $10 200 ($13 555 CAD), which is the very next major horizontal support.
BTC then regained and is currently above the 200 simple moving average (MA200) on the 1 hour chart.
On the 4H chart, BTC had a 0.618 Fibonacci retracement of the recent drop from $10 955 to $9 755 ($14 563 – $12 968 CAD), but was unable to close above it, since this level is also aligned with both MA50 and MA100 on the 4H chart, which has proven to be strong resistance.
There is also a strong possibility of a bearish cross looming between these 2 moving averages, and we have potential for bearish divergence on the 4H Money Flow Index (MFI), an oscillator which incorporates both volume and price, so the path of least resistance is to the downside over the short term.
On the Relative Strength Index (RSI), BTC is sitting right in the apex of a larger wedge, and so a breakdown from this level is expected to be significant.
ADX / DI (trend strength / trend direction indicator), is currently bullish on that short-term breakout this morning, however the strength of this short-term trend is currently below 25 so not strong enough to consider this to be a reversal.
On the daily chart, BTC is currently ranging between the 50-day simple moving average (MA50), which is currently sitting at around $10 650 ($14 153 CAD) and the 100-day simple moving average (MA100), which is currently sitting at around $10 000 ($13 298 CAD) support level, both of which are also currently acting as strong levels of horizontal resistance and support, and with BTC unable to close above or below either of these levels since the start of August.
Bitcoin broke the CCI (Commodity Channel Index – which identifies cyclical trends) uptrend support a couple of weeks ago, at the time that it simultaneously lost the 50-day simple moving average as support, and is at risk of breaking yet another CCI trend line support, which is likely to happen if and when BTC loses the 100-day simple moving average as support.
This bearish scenario should take BTC down to the next significant level of horizontal support, between $9 300 – $9 486 ($12 367 – $12 615 CAD). Below this level, BTC has the larger trend line support connecting the lows since the drop from $13 880 ($18 451 CAD) and major horizontal support between $7 700 – $8 000 ($10 235 – $10 634 CAD) which is also close to the 200-day simple moving average (MA200) support.
The trend is still bearish on the daily chart, with RSI still below centerpoint, and ADX / DI still playing out with -DI (Bearish Directional Indicator) still above +DI (Bullish Directional Indicator), however ADX (strength of this trend) is still below 25 so not strong enough to confirm the bearish case just yet.
A break of the RSI uptrend support, should confirm a breakdown to those lower levels.
On the weekly chart, BTC broke uptrend support, but so far has not been able to close back above it. ADX/DI still shows bullish trend with strong trend strength, however, this the strength of trend is beginning to decline and the +DI and -DI are beginning to converge.
RSI is still above centerpoint on the weekly chart, and still well above the level of RSI market structure which was previously broken when BTC capitulated to the December 2018 lows. There could be potential for hidden bullish divergence but this can easily be invalidated at these levels, which are neither overbought nor oversold.
BTC has been unable to close back above the 0.618 Fibonacci retracement level ($10 559) ($14 033 CAD) of the recent swing from $9 467 to $12 325, which is also aligned with the larger trend line resistance, both of which should confirm the bullish scenario, if BTC manages a weekly candle close above this level.
On this higher time frame, there is significant support in the form of the 100-week simple moving average (MA100) at around, $7400 ($9 842 CAD) and the 50-week simple moving average (MA50) which is currently sitting at around $6 800 ($9 045 CAD), as well as the 0.618 Fibonacci retracement level of overall move from $3 122 – $13 880 ($4 152 – $18 465 CAD). Below this we have SMA200 currently aligned with the 0.886 Fibonacci retracement level of the same move.
Zooming out to the monthly chart for the bigger picture on a much larger time frame, the 50-month simple moving average (MA50) is still perfectly aligned with the larger trend line support connecting the 2015 bear market lows to the subsequent lows of the 2016 uptrend.
Considering that Bitcoin is currently in a precarious range between $10 000 – $10 400 ($13 291 – $13 823 CAD), it’s worth considering the bearish scenario, just in case the larger uptrend has been broken from the $3 122 ($4 150 CAD) lows.
If a new downtrend were to develop, there would be significant horizontal, MA50 and 0.214 Fibonacci support at $4 328 ($5 753 CAD).
On the other hand if BTC were to continue the uptrend, and break all-time-highs, there would be significant resistance in the form of the 1.214 Fibonacci extension level at around $23 841 ($31 693 CAD).
The bearish scenario will be a close below recent major horizontal support at $9300 – $9480 ($12 367 – $12 615 CAD), which has yet to be broken since $13 880 ($18 465 CAD), the start of this current corrective phase, and the bullish scenario will be a close above $10 650 ($14 153 CAD), which is major horizontal resistance, daily MA50 resistance, and the 0.618 Fibonacci retracement level of the prior drop from $12 325 to $9 467 ($16 399 – $12 594 CAD).
DISCLAIMER: The analysis provided in this article is for educational purposes and should not be considered an investment recommendation, All examples and analysis used are for illustration purposes only. All analysis is of the personal opinion of the technical analysis writer.
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