Bitcoin (BTC/USD) has had a tumultuous week, first breaking below the $9500 / $9600 ($12 569 / $12 702 CAD) trendline support of the corrective phase, then breaking down from the critical $9 386 ($12 419 CAD) triangle support, which then became the catalyst for bitcoin to descend into free-fall mode, losing both the 200-day simple moving average (MA200) and $8 500 ($11 246 CAD) support level (the 50% retracement level of the entire move up from $3 122 to $13 880 / $4 130 to $18 364 CAD) in the process.
Bitcoin then eventually found stability in the $7 700 – $8 000 ($10 186 – $10 583 CAD) major horizontal support range, which is aligned with the 100-week simple moving average (MA100), after a 29% drop from the $10 949 ($14 484 CAD) prior swing high on the weekly.
On the weekly chart, bitcoin found support right at the weekly MA100. ADX/DI (trend strength / trend direction) is still bullish with +DI (bullish trend direction) marginally above -DI (bearish trend direction), although +DI and -DI are very close to converging and bullish trend strength is still declining, although still well-above the 25 level so the bullish trend is still marginally in tact. A bearish cross could mark a trend reversal, however this is yet to happen, and more likely to coincide with a bearish deathcross between MA50 and MA200 on the daily chart.
Volume has picked up on the weekly chart, with a strong bearish volume spike after gradually declining for more than 3 months. This reflects an end to the indecisiveness which was a defining characteristic of the corrective triangle, before the market finally decided on a direction.
If BTC loses the weekly MA100 and $7 600 ($10 055 CAD) major horizontal support level, there should be major support at $7 231 ($9 567 CAD), which is the 0.618 Fibonacci golden ratio retracement level, of the entire move up from $3 122 to $13 880 ($4 130 to $18 364 CAD) .
If BTC drops below the $7 000 ($9 266 CAD) horizontal support level, BTC could then go on to retest weekly MA50, somewhere between $6 600 ($8 732 CAD) and $6 800 ($8 998 CAD).
If BTC recovers from the current level, there will be major resistance on the weekly chart between $8 962 ($11 861 CAD) and $9 386 ($12 419 CAD), i.e. between the 0.382 Fibonacci retracement level of the drop from $10 949 ($14 484 CAD), and the triangle support turned resistance / 50% retracement level of the drop from $10 949 ($14 484 CAD).
The next major resistance region to contend with, if BTC is able to regain the critical $9 386 ($12 419 CAD) resistance level, is between the 0.618 – 0.786 Fibonacci retracement level of the drop from $10 949 ($14 484 CAD), between $9 713 ($12 855 CAD) and $10 256 ($13 574 CAD). If BTC can regain this level, it can also regain the prior triangle’s trendline resistance as support which is bullish over the long term.
On the daily chart, volume has been gradually declining since the initial drop to the $8 000 ($10 583 CAD) support, showing lack of certainty in trend direction over the short term while BTC establishes a short-term low.
Bitcoin did bounce from the weekly MA100 support to retest the daily MA200 resistance level around $8 400, however, BTC was unsuccessful in its attempt and has since retraced to print a marginally lower low on the weekly MA100 support.
ADX/DI reflects a bearish trend on the daily chart with -DI well-above +DI, and with strong increasing bearish trend strength with ADX currently at 46 (well-above the 25 level). Price is also well-below the bearish Ichimoku cloud signalling a bearish trend on the daily chart.
Bitcoin is currently in oversold territory, however, on all 3 momentum oscillators, namely MFI (Money Flow Index), RSI (Relative Strength Index) and StochRSI, which could signal a relief rally from the weekly MA100 support to possibly retest $8 400 ($11 118 CAD), which is the daily MA200 resistance level and 0.214 Fibonacci retracement level of the drop from $10 949 ($14 484 CAD), followed by the $8 500 ($11 246 CAD) – $8 732 ($11 558 CAD) area of resistance on the 4H chart (between the 50% retracement level of entire move from $3 122 to $13 880 / $4 130 to $18 364 CAD and the 4-hour MA50 / 0.382 Fibonacci retracement level of the drop from $10 380 ($13 738 CAD)).
If BTC can regain $8 732 ($11 558 CAD) as support over the short term on the 4H chart, BTC could go on to retest the 0.382 Fibonacci retracement level of the drop from $10 949 ($14 484 CAD), currently at $8 950 ($11 846 CAD), followed by the critical $9 386 ($12 419 CAD) resistance level (prior triangle support) which is also aligned with the 50% retracement level of the drop from $10 949 ($14 484 CAD) and MA100 on the 4H chart.
On the 4-hour chart, ADX/DI is reflecting a bearish trend, with -DI above +DI and a strong strength of trend, however this strength is currently declining and fast approaching the 25 level, meaning BTC could experience a short-lived trend reversal over the immediate short term.
Having found support at the weekly MA100, and with BTC currently showing bullish divergence on the hourly chart, BTC could experience a relief rally from this level to retest $8 732 ($11 558 CAD) as resistance, which is the 4-hour MA50 and the 0.382 Fibonacci retracement level of the drop from $10 380 ($13 738 CAD).
MFI (Money Flow Index) does have strong potential, however, to print hidden bearish divergence on the 4-hour chart, which I suspect could potentially play out once the 4-hour MFI approaches oversold territory.
Over the short term, this divergence could potentially play out once BTC retests $8 732 ($11 558 CAD) as resistance (4-hour MA50 / 0.382 Fibonacci retracement level of the drop from $10 380 ($13 738 CAD)), before potentially resuming the downtrend towards the $7 600 ($10 055 CAD) support level followed by the lower $7k ($9 266 CAD) region.
To summarize, bitcoin is long-term bullish above the $9 713 ($12 855 CAD) to $10 256 ($13 574 CAD) resistance range, and bearish below the $6 600 ($8 732 CAD) to $7k ($9 266 CAD) support range. There is still potential for a reversal from above the $7k level, as long as the weekly bullish trend remains in tact and as long as there is no death cross between the MA50 and MA200 on the daily chart.
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