Bitcoin (BTC/USD) has chosen its path after a week of uncertainty and consolidation right below trend line resistance. BTC was again unable to close above that resistance at $12 000 ($15 921 CAD) on the weekly chart, and was unable to clear neither the 0.214 retracement level ($11 577) ($15 360 CAD) of the larger move from $3 122 to $13 880 ($4 143 – $18 421 CAD), nor the 0.618 Fibonacci retracement level ($11 614) ($15 409 CAD) of the preceding swing from $13 200 to $9 049 ($17 514 – $12 009 CAD).
On the weekly chart, BTC is still generally bullish overall, with RSI still well above centrepoint, and ADX / DI showing strong bullish trend strength, however on the daily chart, RSI is now below centrepoint and ADX / DI had a bearish cross between -DI (Negative Directional Indicator) and +DI (Positive Directional Indicator) on the 13th of August, although the strength of trend (ADX) is still relatively weak below 25. This means that BTC has had a confirmed short-term trend reversal. BTC is bullish over the mid-to-long term but short-term bearish.
On the daily chart, the Money Flow Index (MFI), a momentum indicator which incorporates both volume and price, has been steadily dropping towards trend line support, and once that support has been broken, the downtrend should escalate over the short term, potentially falling below $9 000 ($11 943 CAD) by the end of August, and for the first time since June 2019. Trading volume is still declining, building up for a large move, and giving credence to a large breakdown, potentially by the end of this month if MFI simultaneously loses that trend line support.
The bears took the reins from the bulls when BTC lost major support on the 14th of August, dropping below the 50-day simple moving average (MA50), 0.5 Fib retracement level of the preceding swing, and $10 850 ($14 398 CAD) major horizontal support on the daily chart. BTC then went into freefall, only finding support once it reached the 100-day simple moving average, around $9 467 ($12 563 CAD).
BTC then quickly regained the $10k ($13 269 CAD) resistance-turned-support on the retracement, consolidating below the MA200 resistance ($10 500) ($13 932 CAD) on the 4H chart for the past 3 days, before breaking above that resistance this morning as ADX and DI experienced a bullish cross, albeit with low trend strength (currently below 25), with the result that price is currently retesting MA50 on the 4H chart at the time of writing, at around $10 650 ($14 131 CAD).
BTC could potentially touch the 0.618 Fibonacci retracement level ($10 779) ($14 302 CAD) of the preceding swing on the 4H on this current retracement, however, ultimately this move is probably not impulsive and BTC should potentially resume the short-term bearish downtrend from that level. There is strong hidden bearish divergence on the 4H StochRSI (an oscillator indicator which is used to determine oversold / overbought levels) which is yet to play out, so any rise is probably going to be short-lived.
If BTC loses the MA100 support on the daily chart, below 9800, the next major level of support will be a retest of $9 500 ($12 605 CAD), followed by $9 100 ($12 077 CAD) although this level probably won’t hold on a third retest since 17 July.
Below this level, BTC then has major horizontal support at $8 750 ($11 612 CAD), followed by major support between the 0.5 Fibonacci retracement level of the overall move from $3 122 to $13 880 ($4 143 – $18 421 CAD) on the weekly chart, and the 100-week simple moving average (MA100) on the weekly chart ($8 500 – $7 880) ($11 279 – $10 456 CAD).
If the 100-week moving average doesn’t hold, BTC has major horizontal support at $7 500 ($9 952 CAD), the 0.618 Fibonacci retracement level of the overall move, coinciding with the 200-day simple moving average (MA200) at $7 231 ($9 595), and followed by major horizontal support at $6 800 ($9 024 CAD).
The bullish case will be a daily close back above $10 850 ($14 400 CAD), which is major horizontal resistance, and aligns with the 50-day simple moving average (MA50). The next level of resistance to then clear would be that trend line resistance and the 0.618 Fibonacci retracement level ($11 233) ($14 908 CAD) of the recent drop from $12 325 ($16 357 CAD) to $9 467 ($12 564 CAD) on the daily chart, although this does seem unlikely just yet as BTC is still in the midst of a short-term downtrend.
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