Bitcoin ranging and consolidating above $9k ($11 832 CAD) support – Setting up a launchpad to $12k ($15 777 CAD) or a sweep of the lows?
Bitcoin (BTC/USD) has been stuck within a choppy range-bound corridor above key support since the end of October, after bitcoin experienced a 40% surge from $7 293 to $10 350 ($9 587 to $13 606 CAD) in the space of only 3 days.
The massive surge in bitcoin’s price followed an announcement from Chinese authorities that the country will be seeking accelerated blockchain adoption, spurring quite a few commentators to adopt a narrative which attributes the pump to Chinese FOMO in the market following the news.
Bitcoin’s rise above $10k ($13 146 CAD) was short-lived, however, with bitcoin quickly dropping back to major trendline support and the 200-day simple moving average (MA200), above the $9 000 level ($11 832 CAD), a level which has been holding strong since, but within a tight range under the $9 386 ($12 339 CAD) major horizontal resistance level.
$9 386 ($12 339 CAD) served as major support for the prior corrective triangle between June and September this year, and since bitcoin pumped last week, bitcoin has not been able to achieve a daily candle close back above this level as of yet.
Short-Term – 4-Hour Chart
Looking at the 4-hour chart, bitcoin has been ranging and contracting above trendline support since losing the $9 386 ($12 339 CAD) support level at the end of last month and is fast approaching an apex between these levels, which means that bitcoin could potentially be setting up for a significant move this week.
For now, however, as can be seen on the 4-hour ADX/DI indicator (trend strength / trend direction), there is no clear trend direction and very low trend strength. Volume has also been gradually declining on the 4-hour chart as a result of this uncertainty and indecisiveness in the market.
Bitcoin experienced a 0.618 Fibonacci retracement (inverse of 0.382 on the chart) to $9 950 ($13 080 CAD), after bitcoin’s drop from the recent $10 350 ($13 606 CAD) peak to the $8 994 ($11 823 CAD) swing low on 26 October 2019.
Bitcoin then subsequently lost the 4-hour 200-bar simple moving average as support in the early hours of 03 November 2019, adding additional major resistance at $9 269 ($12 185 CAD), directly above the current price, which has been ranging sideways beneath since then.
If bitcoin were to resume the downtrend over the short-term, I suspect bitcoin will ultimately find major support at the 4-hour 200-bar simple moving average (MA200), somewhere between $8 583 and $8 300 ($11 283 and $10 911 CAD), i.e between the 1.214 and 1.382 Fibonacci extension levels of the drop from $10 350 to $8 994 ($13 606 to $11 823 CAD). This level also aligns with $8 461 ($11 123 CAD), the 0.618 Fibonacci retracement level (inverted 0.382 on the chart) of the surge from $7 293 to $10 350 ($9 587 to $13 606 CAD).
If bitcoin manages to regain the $9 386 ($12 339 CAD) major horizontal support level, the 200-day simple moving average and the recent $10 350 ($13 606 CAD) swing high as support, bitcoin could then potentially go on to test the $11 004 – $11 181 ($14 469 – $14 701 CAD) range of resistance, which is between the 1.214 and 1.272 Fibonacci extension levels of the surge from $7 293 to $10 350 ($9 587 to $13 606 CAD).
Mid-Term – Daily Chart
Bitcoin seems to have broken above major trendline resistance on the daily chart, following the price surge to $10 350 ($13 606 CAD) at the end of last month, but as of yet, has been unable to regain the 100-day simple moving average as support, which is currently sitting at the $9 600 ($12 622 CAD) level.
Instead, bitcoin has been consolidating along that trendline (which connects the highs from $13 880 / $18 250 CAD), and above the 200-day simple moving average (MA200), both of which have held as support until now.
I suspect that bitcoin could potentially lose the 200-day simple moving average (MA200) in the days to come, and could either continue moving sideways before dropping for a retest of that trendline as support once that trendline and the 50-day simple moving average (MA50) align with the 0.618 Fibonacci retracement level ($8 461 / $11 123 CAD) of the surge from $7 293 to $10 350 ($9 587 to $13 606 CAD).
Alternatively, bitcoin could potentially lose that trendline as support very soon, before finding that 0.618 Fibonacci retracement support level, but below significant trendline resistance, and potentially below the daily MA50.
Bitcoin is currently slightly above centerpoint on the daily Relative Strength Index (RSI), which means the bullish trend is slightly intact, considering that the ADX/DI indicator has been showing a strong bullish trend with +DI (bullish trend direction) above -DI (bearish trend direction).
It should be noted, however, that the strength of the bullish trend has been gradually declining on a daily basis since the bullish DI cross when bitcoin surged at the end of last month, and although ADX (trend strength) is still above the threshold 25 level, that level is fast approaching, after gradually dropping from 43 to where it’s currently sitting at 34.
If bitcoin loses MA50 and the 0.618 Fibonacci retracement level ($8 461 / $11 123 CAD) of the surge from $7 293 to $10 350 ($9 587 to $13 606 CAD) as support, bitcoin could potentially establish a new mid-term bottom, and there will be major support at the weekly 0.618 Fibonacci retracement level ($7 231 / $9 508 CAD) of the entire uptrend from $3 122 to $13 880 ($4 105 to $18 250 CAD), with a major support range between $7 087 and $7 300 ($9 320 and $9 600 CAD).
Alternatively, bitcoin might potentially go on to retest major trendline support in a major horizontal support range between $6 067 to $6 465 ($7 978 to $8 502 CAD).
If the 50-day simple moving average and that 0.618 retracement level do hold as support, on the other hand, and bitcoin is able to regain that major trendline, bitcoin could potentially experience a 1.618 Fibonnaci extension of the surge from $7 293 to $10 350 ($9 587 to $13 606 CAD), impulsively reaching major resistance around $12 238 ($16 094 CAD).
Long-Term- Weekly Chart
On the weekly chart, you can see that the $12 238 ($16 094 CAD) resistance level also aligns with a 0.618 Fibonacci retracement of the corrective drop from $13 880 to $7 293 ($18 250 to $9 587 CAD).
Bitcoin is currently still sitting pretty above the 100-week simple moving average (MA100), which is still holding strong since the recent retest, however, if bitcoin loses that level and drops further to the $7 087 to $7 300 ($9 320 to $9 600 CAD) support range to establish a new low, this would coincide with both the 50-week simple moving average (currently sitting at $7k / $9 206 CAD) and the 0.618 Fibonacci retracement level ($7 231 / $9 508 CAD) of the entire uptrend from $3 122 to $13 880 ($4 106 to $18 250 CAD).
The next range of major support below that level is in the low $6k ($7 900 CAD) region, which held as major horizontal support throughout 2018.
Relative Strength Index (RSI) is slightly above centerpoint on the weekly chart, and ADX/DI (trend strength / trend direction) is reflecting a bullish trend, albeit marginally in-tact, with +DI still slightly above -DI and with trend strength sitting right at the 25 threshold level which is needed in order for the bullish trend strength to hold any significance.
It should be noted that bullish trend strength (ADX) has been gradually declining on a weekly basis since the $12 325 ($16 210 CAD) swing high, dropping on a weekly basis from the 61 level on the week starting 05 August 2019, to the current 25 level this week, so the bulls really need to step in relatively soon for the bullish trend to remain in-tact, and in order for a new weekly bearish trend to be diverted.
Once bitcoin has established a major low and if the 0.618 Fibonacci retracement level (of the move from $3 122 to $13 880 / $4 105 to $18 250 CAD) holds strong between $6k and $7 231 ($7 900 and $9 511 CAD), BTC could potentially resume the long-term uptrend with an impulsive move towards the $16 182 to $16 806 ($21 284 to $22 104 CAD) resistance range, if bitcoin manages a 1.214 to 1.272 Fibonacci extension of the entire impulsive move from $3 122 to $13 880 ($4 105 to $18 250 CAD).
Above this level there is the 1.382 Fibonacci extension level at $17 989 ($23 659 CAD), followed by the 1.618 Fibonacci extension level for a new all-time high at $20 528 ($26 999 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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