Bitcoin (BTC/USD) has been flashing red since the start of the weekend after unsuccessfully retesting the major $10 950 ($14 393 CAD) resistance level, which BTC needed to clear in order to resume the bullish uptrend after a tedious corrective phase from the recent $13 880 ($18 245 CAD) peak.
Bitcoin seems to still be within the confines of a larger corrective triangle, currently sitting closer to triangle resistance than support. On 6 September, bitcoin first experienced a flash crash from $10 949 to $10 200 ($14 392 – $13 407 CAD), which wasn’t able to hold after another unsuccessful retest of the larger trend line resistance, which saw BTC then print a lower low, below $10 100 ($13 276 CAD), only to then recover back above $10 200 ($13 407 CAD) early on Monday morning and shortly after.
On the weekly chart, bitcoin managed more than a 50% retracement (above $10 822) ($14 225 CAD) of the prior correction from $12 325 to $9 320 ($16 201 – $12 251 CAD), reaching and retesting the crucial $10 950 ($14 393 CAD) horizontal resistance last week, however, bitcoin was only able to manage a wick to those levels before reversing sharply and closing, yet again, below the prior $10 450 ($13 737 CAD) daily upper range resistance for the third week in a row (upper range resistance for the second half of August on the daily chart). This coincides with a close below the 0.382 Fibonacci ($10 467) retracement level of the prior correction from $12 325 ($16 201 CAD).
Weekly trading volume has been tapering off with each successive recovery rally, with price recording lower highs and higher lows as bitcoin contracts within a larger triangle, reflecting indecisive and range-bound price action.
ADX/DI (trend strength / trend direction) still reflects bullish trend with +DI (bullish directional indicator) above -DI (bearish directional indicator) and ADX reflecting strong trend strength at 51.38, which is still well-above the 25 level, however +DI is starting to converge with -DI, and ADX has been declining since the 05 August, $12 325 ($16 201 CAD) peak, so this is something to keep an eye on.
RSI (Relative Strength Index) is also still well-above centrepoint, so along with bullish ADX/DI, the overall bullish trend is still in tact on the weekly chart.
The next level to watch on the weekly chart is a close below candle support and the 0.382 Fibonnaci retracement level ($9770) of the entire move up from $3 122 to $13 880 ($4 104 – $18 245 CAD), and failing that, the larger trend line support which is currently aligned with the $9 386 ($12 340 CAD) major support level, a level which has held throughout this corrective phase from $13 880 ($18 245 CAD).
A drop below $9 386 ($12 340 CAD) could take us to either the 50% retracement mark ($8 500) ($11 175 CAD) of the overall move from $3 122 to $13 880 ($4 104 – $18 245 CAD), or down to retest major horizontal support and the 100-week Simple Moving Average (MA100) between $7 500 – $7 700 ($9 860 – $10 123 CAD) before potentially finding a bottom.
On the daily chart, bitcoin temporarily wicked below the support of the 100-day Simple Moving Average (MA100 around $10 270 / $13 501 CAD) on Monday, the current daily candle, before recovering above that level shortly after, although it is yet to be determined, at the time of writing, at which level today’s daily candle will close.
MA50 is slowly converging with MA100 for a possible death cross (bearish cross between MA50 and MA100, which has the potential for a major sell-off), although RSI is sitting right at centerpoint with ADX below the 25 level and with no clear trend direction at this stage on the daily.
Below $9 942 ($13 072 CAD), the 0.618 Fibonacci retracement level of the prior relief rally from $9 320 to $10 949 ($12 252 – $14 394 CAD), there is major triangle support at $9 386, which has been respected up-until now, however if this support gives away on the 4th retest since July, BTC could experience a 1.382 to 1.618 Fibonacci extension of the larger corrective wave (from $12 325 to $9 320) ($16 201 – $12 251 CAD), which takes BTC down to between $8 172 and $7 462 ($10 743 – $9 808 CAD) (below the 50% retracement level ($8 500) of the entire move from $3 122 to $13 880 on the weekly chart), where BTC could potentially retest the daily MA200 support for the first time since April 2019. MA200 is currently sitting close to $7 800.
A corrective move to between $7 462 and $7 800 (would also line up with a retest of the weekly MA100, and major horizontal support on the weekly chart, making this level an ideal bottom scenario if $8 500 ($11 175 CAD) and the 50% retracement level doesn’t hold as support.
Looking at the 4-hour chart, BTC had lost 4-hour MA200 as support on 6 September before unsuccessfully retesting MA200 and the larger trend line as resistance ($10 600) ($13 933 CAD) the following day. BTC/USD then dropped below MA50 on 8 September, eventually finding support at MA100 this morning, a level which coincides with the 50% retracement level ($10 134) ($13 321 CAD) of the recent impulse from $9 320 to $10 949 ($12 253 – $14 394 CAD).
Bitcoin then rallied back up for a retest of the $10 134 resistance level, which is the 0.382 Fibonacci retracement level of the recent impulse to $10 949 ($14 394 CAD). The price is currently sitting right above this level at $10 280 ($13 515 CAD) at the time of writing, so yet to be determined whether MA50 will hold over the short term.
There could potentially be more downside to come with the next significant level to watch being the 0.618 Fibonacci retracement level of the prior relief rally from $9 320 to $10 949 ($12 252 – $14 394 CAD), which is currently sitting at $9 942 ($13 072 CAD) on Bitstamp.
ADX/DI is currently reflecting a bearish trend direction, however +DI and – DI are beginning to converge and strength of trend is below 25, so not significant enough to determine whether this morning’s rally will continue, or whether the price has reached a short term top before continuing the down-trend.
Trading volume has been declining as OBV (On-Balance-Volume) starts nearing the apex of a larger wedge, which should align and break out in the same direction as the trend which ultimately plays out.
A bullish OBV break coupled with a close above $10 600 ($13 933 CAD) (0.214 Fibonacci retracement level of recent impulse to $10 949) and the larger trend line resistance, should have BTC retesting that $10 950 major resistance yet again, and potentially extending to $11 200 ($14 724 CAD), which is the next major horizontal resistance level.
A bearish break of OBV should reflect a rejection from $10 600 ($13 933 CAD) and should see BTC heading to retest $9 942 ($13 070), the 0.618 Fibonacci retracement level of the the recent impulse to $10 949 ($14 394 CAD), or possibly back to retest larger triangle support at $9 386 ($12 339 CAD), or lower, should $9800 – $9942 ($12 884 – $13 070 CAD) not hold as support 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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