Bitcoin (BTC/USD) has experienced higher levels of volatility of late, as global uncertainty, and the trade war between the US and China intensifies. Bitcoin is also developing a newly-formed inverse correlation to alts, as BTC looks to potentially join the ranks of ‘safe haven’ assets.
After multiple unsuccessful attempts, BTC was again sharply rejected from the $12 000 ($15 888 CAD) region, and was subject to yet another flash crash, which saw BTC tumbling from $11 870 ($15 715 CAD) to $11 200 ($14 828 CAD) this past Saturday, 10 August 2019, in a single 15 minute candle.
The drop was not followed by the rebound which BTC had incurred the week before from $11 200 ($14 282 CAD), giving credence to a slightly bearish bias, and a slow-down in buying pressure.
BTC was unable to regain significant levels of resistance on the weekly close. Price closed below the trend line resistance connecting the recent swing highs (+-$11 850) (+-$15 691 CAD); below the 0.618 Fibonacci retracement level ($11 614) ($15 371 CAD) of the recent corrective move from $13 200 ($17 414 CAD) to $9 049 ($11 938 CAD); and was also unable to regain the 0.214 Fibonnaci retracement level ($11 577) ($15 330 CAD) of the overall move from the $3 122 ($4 119 CAD) lows to the recent $13 880 ($18 309 CAD) peak.
ADX and DI (trend direction and strength), still reflects that the overall trend is bullish on the weekly chart, with +DI (Positive Directional Indicator) still well above -DI (Negative Directional Indicator). ADX (trend strength) is still reflecting a strong rising uptrend, with ADX at a strong 61.79 level at the weekly close, and which has been powering along with consecutive weekly increases since the week starting 22 April 2019.
On the daily chart, the $11 200 ($14 282 CAD) horizontal support is holding strong at the time of writing, very briefly dipping to $11 080, before quickly regaining $11 200 ($14 282 CAD).
ADX / DI reflects a slightly bullish trend direction with +DI above -DI, however the strength of this trend is still below the 25 level, currently sitting at +-22 for the past 3 days, and indecisiveness is still evident on the daily time frame.
The Money Flow Index (MFI), a momentum indicator which incorporates both volume and price, is currently sitting in overbought territory on the daily, however, RSI (Relative Strength Index) is slightly above centre point, reflecting the unconvincing, yet slightly bullish bias. A drop below the 50 level on the daily could potentially result in trend reversal.
A daily close below $11 200 ($14 282 CAD) and the 0.5 Fibonnaci retracement level ($11 124) ($14 730 CAD) of the recent corrective move from $13 200 ($17 476 CAD) to $9 049 ($11 980 CAD), should see BTC retesting the 50-day Simple Moving Average (MA50), which is currently sitting slightly above major horizontal support around $10 800 ($14 299 CAD).
If $10 800 ($14 299 CAD) doesn’t hold, BTC can be expected to then retest the 0.382 Fibonnaci retracement level ($10 635) ($14 082 CAD) of the above mentioned corrective move, followed by the 0.236 retracement level and round number support at $10 000 ($13 243 CAD).
Below the $10 000 ($13 243 CAD) level, BTC will have significant support around $9500 ($12 580 CAD), in the form of major horizontal support, which is also aligned with the 100-day Simple Moving Average (MA100), and is currently sitting slightly below the 0.382 Fibonacci retracement level ($9 770) ($12 938 CAD) of the overall move from the $3 122 ($4 119 CAD) lows to the recent $13 880 ($18 309 CAD) peak.
Below $9 500 ($12 580 CAD), BTC could potentially retest the 100-week simple moving average (MA100), which is also roughly the 0.618 Fibonacci retracement level of the overall move from $3 122 ($4 134 CAD) to $13 880 ($18 381 CAD), and trend support connecting the July lows. This should take BTC to somewhere between $7-8000 ($9 270 – $10 952 CAD) over the next few weeks.
On the 4H chart, there was a bullish cross between MA100 and MA200, resulting in a spike and unsuccessful retest of the 4H MA50 and major trend line resistance, at around $11 550 ($15 292 CAD), and although BTC did manage to close above major horizontal support at $11 475 ($15 193 CAD), BTC quickly lost that level on the very next 4H candle, reverting back to the consolidation range of $11 270-$11 475 ($14 922 – $15 193 CAD), where BTC has spent most of it’s time consolidating since the flash crash from $11 894 ($15 748 CAD).
ADX and DI currently reflects a slightly bearish bias with -DI above +DI and although bearish trend strength is increasing, it is still weak, with ADX not yet above the 25 level.
Trading volume has been low over the past 3 days, while BTC has been consolidating, and has also been tapering off on the 4H chart since the heavy rejection from $12 145 ($16 080 CAD) on 7 August 2019. This reflects the current indecisiveness of the market, which was also evident during the consolidation preceding the flash crash on the weekend.
There is hidden bearish divergence on the 4H StochRSI, which should be confirmed by a subsequent drop below the line of support depicted on the 4H OBV (On-Balance-Volume), a momentum indicator that uses volume flow to predict changes in price.
Although the overall trend is bullish, the market is still in a precarious position on the 1D and 4H charts. It seems more likely that there is more downside to come, and any upside is expected to be short-lived over the short term.
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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